Changes to Certain Alcohol-Related Regulations Governing Bond Requirements and Tax Return Filing Periods, 1108-1137 [2016-31417]

Agencies

• Alcohol and Tobacco Tax and Trade Bureau
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 82, Number 2 (Wednesday, January 4, 2017)]
[Rules and Regulations]
[Pages 1108-1137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31417]



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Vol. 82

Wednesday,

No. 2

January 4, 2017

Part V





Department of the Treasury





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Alcohol and Tobacco Tax and Trade Bureau





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27 CFR Parts 18, 19, 24, et al.





Changes to Certain Alcohol-Related Regulations Governing Bond 
Requirements and Tax Return Filing Periods; Temporary Rule

Federal Register / Vol. 82 , No. 2 / Wednesday, January 4, 2017 / 
Rules and Regulations

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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Parts 18, 19, 24, 25, 26, 27, 28, and 30

[Docket No. TTB-2016-0013; T.D. TTB-146; Re: Notice No. 167]
RIN 1513-AC30


Changes to Certain Alcohol-Related Regulations Governing Bond 
Requirements and Tax Return Filing Periods

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Temporary rule; Treasury decision; cross reference to notice of 
proposed rulemaking.

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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau (TTB) is amending 
its regulations relating to alcohol excise taxes to implement certain 
changes made to the Internal Revenue Code of 1986 (IRC) by the 
Protecting Americans from Tax Hikes Act of 2015 (PATH Act). This 
rulemaking implements section 332 of the PATH Act, which amends the IRC 
to change tax return due dates and remove bond requirements for certain 
eligible taxpayers. Section 332 authorizes a new annual return period 
for taxpayers paying taxes imposed with respect to distilled spirits, 
wines, and beer on a deferred basis who reasonably expect to be liable 
for not more than $1,000 in such taxes imposed for the calendar year 
and who are liable for not more than $1,000 in such taxes in the 
preceding calendar year. Section 332 also removes bond requirements for 
taxpayers who are eligible to pay excise taxes on distilled spirits, 
wines, and beer using quarterly or annual return periods and who pay 
those taxes on a deferred basis. Under section 332, such taxpayers are 
exempt from bond requirements with respect to distilled spirits and 
wine only to the extent those products are for nonindustrial use. TTB 
is soliciting comments from all interested parties on these amendments 
through a notice of proposed rulemaking published elsewhere in this 
issue of the Federal Register.

DATES: This rule is effective January 4, 2017.

FOR FURTHER INFORMATION CONTACT: Ben Birkhill, Regulations and Rulings 
Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW., 
Box 12, Washington, DC 20005; telephone 202-453-2265.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. The PATH Act
II. TTB Authority
    A. Provisions Governing Tax Payment
    B. Provisions Governing Bonds
    C. Delegation of Authority
III. The TTB Regulations
IV. Overview of the Amendments to the Regulations
V. Major Amendments Relating to Tax Returns
    A. Incorporation of Annual Return Filing Period
    B. Elimination of Non-Statutory Annual Return Period for Certain 
Wine Premises
VI. Bond Exemption Eligibility
    A. Circumstances Where Section 5061(d)(4)(A) Applies to a 
Taxpayer
    B. Types of Alcohol Subject to the Exemption
    C. Summary of Eligibility Criteria for the Bond Exemption
VII. Other Bond-Related Amendments
    A. Retention of Bond-Related Terms in the Regulations
    B. Incorporation of Cash Bond Requirements
    C. Brewers Holding Bonds with Flat $1,000 Penal Sums
    D. Qualification for the Bond Exemption by Applicants
    E. Qualification for the Bond Exemption by Existing Proprietors
    F. New Bonds for Previously Exempt Proprietors
VIII. Miscellaneous and Technical Amendments
    A. Amendments to 27 CFR parts 18 and 30
    B. Technical Amendments Relating to Surety and Collateral Bonds
    C. Updates to Form Numbers in 27 CFR parts 26 and 28
    D. Obsolete Regulations in 27 CFR part 28 Relating to TTB Form 
5110.68
IX. Public Participation
X. Regulatory Analyses and Notices
    A. Regulatory Flexibility Act
    B. Executive Order 12866
    C. Paperwork Reduction Act
    D. Inapplicability of Prior Notice and Comment and Delayed 
Effective Date Procedures
XI. Drafting Information
List of Subjects
Amendments to the Regulations

I. The PATH Act

    On December 18, 2015, the President signed into law the 
Consolidated Appropriations Act, 2016 (Public Law 114-113). Division Q 
of this Act is titled the Protecting Americans from Tax Hikes Act of 
2015 (PATH Act). Section 332 of the PATH Act amends the Internal 
Revenue Code of 1986 (IRC) to change tax return due dates and remove 
bond requirements for certain eligible taxpayers. These PATH Act 
amendments apply beginning January 1, 2017, to certain taxpayers who 
reasonably expect to be liable for not more than $50,000 in taxes 
imposed with respect to distilled spirits, wines, and beer for the 
calendar year and who were not liable for more than $50,000 in such 
taxes in the preceding calendar year.
    Section 332 of the PATH Act amends the IRC to authorize a new 
annual tax return period in addition to the semimonthly and quarterly 
tax return periods that were authorized for excise taxpayers under the 
IRC prior to the enactment of the PATH Act. Under the PATH Act, 
taxpayers must pay taxes imposed with respect to distilled spirits, 
wines, and beer on a deferred basis using semimonthly periods unless 
they meet the tax liability limits for the use of annual or quarterly 
deferred payment periods. As discussed further below, deferred payment 
of tax refers to payment using one of the three return periods 
prescribed under the IRC rather than payment each time the tax becomes 
due. To use the new annual deferred payment period, the taxpayer must 
reasonably expect to be liable for not more than $1,000 in excise taxes 
imposed with respect to distilled spirits, wines, and beer for the 
calendar year and must be liable for not more than $1,000 in such taxes 
in the preceding calendar year. To use quarterly deferred payment 
periods, the taxpayer must reasonably expect to be liable for not more 
than $50,000 in such taxes imposed for the calendar year and must be 
liable for not more than $50,000 in such taxes in the preceding 
calendar year.
    Section 332 also amends several provisions of the IRC to remove 
bond requirements for certain eligible taxpayers. To be exempt from 
bond requirements, taxpayers must be eligible to pay excise taxes 
imposed with respect to distilled spirits, wines, and beer using 
quarterly or annual return periods and must pay such taxes on a 
deferred basis. In addition, taxpayers are exempt from bond 
requirements with respect to distilled spirits and wine only to the 
extent those products are for nonindustrial use. These amendments are 
discussed further below.

II. TTB Authority

    The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers 
provisions in chapter 51 of the IRC pertaining to the taxation of 
distilled spirits, wines, and beer (see title 26 of the United States 
Code (U.S.C.), chapter 51 (26 U.S.C. chapter 51)). Sections 5001, 5041, 
and 5051 of the IRC (26 U.S.C. 5001, 5041, and 5051) impose tax on 
distilled spirits, wines, and beer produced in or imported into the 
United States. Generally, such taxes are determined (i.e., become due 
for payment) when they are removed from qualified facilities in the 
United States

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or imported as provided in sections 5006, 5043, and 5054 of the IRC (26 
U.S.C. 5006, 5043, and 5054). In addition, section 7652 of the IRC (26 
U.S.C. 7652) imposes tax upon distilled spirits, wines, and beer coming 
into the United States from Puerto Rico and the U.S. Virgin Islands 
under certain circumstances. The tax imposed on products under section 
7652 is equal to the internal revenue tax imposed in the United States 
upon like articles of domestic manufacture.

A. Provisions Governing Tax Payment

    Section 5061 of the IRC (26 U.S.C. 5061) governs the collection of 
excise tax on distilled spirits, wines, and beer. Section 5061(a) 
states that such taxes shall be collected on the basis of a return and 
gives the Secretary of the Treasury (the Secretary) the authority to 
prescribe regulations relating to such returns. Section 5061(d) 
prescribes the time periods and due dates for paying such taxes by 
return on a deferred basis. Section 5061(d)(1) provides that the last 
day for payment of such taxes shall be the 14th day after the last day 
of the semimonthly period during which the product is withdrawn for 
deferred payment of tax from certain qualified facilities in the United 
States. Sections 5061(d)(2) and 5061(d)(3) prescribe similar 
semimonthly periods and due dates for imported distilled spirits, 
wines, and beer and for such products brought into the United States 
from Puerto Rico.
    TTB collects excise tax paid under section 5061(d)(1) and 
5061(d)(3), which govern, respectively, withdrawals of distilled 
spirits, wines, and beer from qualified facilities in the United States 
and certain shipments of distilled spirits, wines, and beer into the 
United States from Puerto Rico. In the latter case, section 7652(a)(2) 
provides authority for payment of the tax before shipment to the United 
States from Puerto Rico. In general, U.S. Customs and Border Protection 
(CBP) collects taxes paid under section 5061(d)(2) on removals of 
imported distilled spirits, wines, and beer. These taxes include those 
paid on distilled spirits, wines, and beer from foreign countries or 
from the U.S. Virgin Islands.
    Section 5061(d)(4), as amended by the PATH Act, authorizes eligible 
taxpayers to use annual or quarterly tax return periods instead of 
semimonthly periods, under certain circumstances. Section 
5061(d)(4)(A)(ii) provides that, in the case of any taxpayer who 
reasonably expects to be liable for not more than $1,000 in excise 
taxes imposed for the calendar year and who was liable for not more 
than $1,000 in such taxes in the preceding calendar year, the last day 
for payment of tax is the 14th day after the last day of the calendar 
year. Section 5061(d)(4)(A)(i) provides that, in the case of any 
taxpayer who reasonably expects to be liable for not more than $50,000 
in excise taxes imposed with respect to distilled spirits, wines, and 
beer for the calendar year and who was liable for not more than $50,000 
in such taxes in the preceding calendar year, the last day for payment 
of tax is the 14th day after the last day of the calendar quarter. 
Section 5061(d)(4)(C) defines the term ``calendar quarter'' as the 
three-month period ending on March 31, June 30, September 30, or 
December 31.
    Taxpayers who use annual or quarterly return periods and exceed the 
$1,000 or $50,000 limits described in the previous paragraph must pay 
such taxes more frequently, as provided in section 5061(d)(4)(B). 
Taxpayers using quarterly periods must use semimonthly periods for any 
portion of the calendar year following the first date on which the 
aggregate amount of such tax due during such calendar year exceeds 
$50,000, and taxpayers using annual periods must use quarterly periods 
for any portion of the calendar year following the first date on which 
the aggregate amount of such tax due during such calendar year exceeds 
$1,000. Section 5061(d)(4)(B) also provides that any tax not paid on 
these dates is due either on the 14th day after the last day of the 
semimonthly period in which such date occurs (in the case of taxpayers 
who exceed the $50,000 limit) or on the 14th day after the last day of 
the calendar quarter in which such date occurs (in the case of 
taxpayers who exceed the $1,000 limit).
    Under some circumstances, the IRC authorizes the removal of 
distilled spirits, wines, and beer from facilities in the United States 
without paying the taxes imposed on such products. Examples of removals 
for which the IRC does not require payment of the tax include certain 
transfers of imported distilled spirits, wines, and beer to qualified 
facilities in the United States (see 26 U.S.C. 5232, 5364, and 5418), 
certain transfers between qualified facilities within the United States 
(see 26 U.S.C. 5212, 5362(b), and 5414), certain withdrawals for 
exportation from the United States (see 26 U.S.C. 5214(a)(4), 
5362(c)(1), and 5053(a)), and certain withdrawals for use in the United 
States for other than alcohol beverage purposes (see 26 U.S.C. 
5214(a)(1)-(3), 5364(d), and 5053(b)). In the last case, some IRC 
provisions refer to these nonbeverage purposes as the ``industrial 
use'' of alcohol (see, e.g., subchapter D of chapter 51 of the IRC, 
``Industrial Use of Distilled Spirits''). The provisions of the Federal 
Alcohol Administration Act (FAA Act), 27 U.S.C. chapter 8, which TTB 
also administers, do not apply to distilled spirits and wine for 
industrial use (see 27 U.S.C. 211(a)(5) and (6), which define these 
types of alcohol as distilled spirits and wine for ``nonindustrial 
use''). The industrial and nonindustrial uses of distilled spirits and 
wine are discussed further below.

B. Provisions Governing Bonds

    The IRC also contains provisions requiring certain persons who are 
liable for taxes imposed with respect to distilled spirits, wines, and 
beer to furnish bonds, which are formal guarantees to pay tax 
obligations under the IRC (see, e.g., 26 U.S.C. 5173, 5354, and 
5401(b)). Subject to the exceptions discussed below, section 5551(a) of 
the IRC (26 U.S.C. 5551(a)) requires approval of such bonds for certain 
businesses as a condition of commencing operations. Generally, the 
producer or the importer of the distilled spirits, wines, and beer is 
liable for taxes imposed until that person either pays the tax or takes 
some other action for which the IRC relieves the person of the 
liability. In the latter case, the IRC may relieve persons from 
liability based on the transfer or withdrawal of the distilled spirits, 
wines, and beer under certain circumstances described in the preceding 
paragraph, such as withdrawal and exportation (see 26 U.S.C. 5005, 
5043, 5054, and 5056). Bonds therefore protect the revenue by covering 
the excise tax liability associated with the distilled spirits, wines, 
and beer until that liability is relieved under the IRC.
    Section 332 of the PATH Act amends several provisions of the IRC to 
remove bond requirements for certain eligible taxpayers. The new bond 
exemption is set forth in new subsection (d) of section 5551 of the 
IRC. The taxpayer's eligibility for the bond exemption is based on 
whether section 5061(d)(4)(A) applies to the taxpayer. Section 
5061(d)(4)(A) authorizes the use of quarterly and annual return periods 
for payment of excise taxes imposed with respect to distilled spirits, 
wines, and beer where the tax liability does not exceed the $1,000 and 
$50,000 limits discussed above. However, the bond exemption is limited 
to bonds ``covering operations or withdrawals of distilled spirits or 
wines for nonindustrial use or of beer.'' Specifically, section 
5551(d)(1) provides that ``[d]uring any period to which subparagraph 
(A) of section 5061(d)(4) applies to a taxpayer (determined after 
application of

[[Page 1110]]

subparagraph (B) thereof), such taxpayer shall not be required to 
furnish any bond covering operations or withdrawals of distilled 
spirits or wines for nonindustrial use or of beer.'' In addition, 
section 5551(d)(2) provides that ``any taxpayer for any period 
described in [section 5551(d)(1)] shall be treated as if sufficient 
bond has been furnished for purposes of covering operations and 
withdrawals of distilled spirits or wines for nonindustrial use or of 
beer for purposes of any requirements relating to bonds under this 
chapter.'' Finally, section 332 of the PATH Act also amends other 
provisions of the IRC to reference the bond exemption in section 
5551(d). These provisions are sections 5173, 5351, and 5401 of the IRC.

C. Delegation of Authority

    TTB administers the provisions of the IRC and FAA Act discussed 
above, and their implementing regulations, pursuant to section 1111(d) 
of the Homeland Security Act of 2002, codified at 6 U.S.C. 531(d). The 
Secretary has delegated various authorities through Treasury Department 
Order 120-01, dated December 10, 2013 (superseding Treasury Department 
Order 120-01, dated January 24, 2003), to the TTB Administrator to 
perform the functions and duties in administration and enforcement of 
these laws.

III. The TTB Regulations

    The TTB regulations implementing the IRC provisions discussed above 
relating to tax payment and bonds are in chapter I of title 27 of the 
Code of Federal Regulations (27 CFR). These regulations include 
provisions governing certain distilled spirits, wine, and beer 
facilities in the United States (27 CFR parts 19, 24, and 25), the 
shipment of distilled spirits, wines, and beer from Puerto Rico and the 
U.S. Virgin Islands to the United States (27 CFR part 26), the 
importation of distilled spirits, wines, and beer from foreign 
countries into the United States (27 CFR part 27), and the exportation 
of distilled spirits, wines, and beer from the United States (27 CFR 
part 28).
    The regulations in 27 CFR parts 19, 24, and 25 govern, 
respectively, the operations of distilled spirits plants (DSPs), 
certain wine premises, and breweries in the United States. Under 27 CFR 
part 24, bonded wine cellars (including bonded wineries) are wine 
premises that are authorized to engage in operations involving non-
taxpaid wine. Proprietors of facilities subject to the regulations in 
27 CFR parts 19, 24, and 25 must receive approval from TTB to operate 
(see 27 CFR 19.72, 24.105, and 25.61). Such operations may include 
production, receipt, and removal of distilled spirits, wines, and beer. 
When the proprietor of the facility removes distilled spirits, wines, 
or beer on which tax has been imposed but not paid, the proprietor must 
pay the tax unless the IRC authorizes the removal without paying the 
tax, as discussed above.
    If the tax must be paid for the removal, the proprietor of the 
facility must file an Excise Tax Return, TTB Form 5000.24, for 
prepayment or deferred payment of tax (see 27 CFR 19.229, 24.271, 
24.275, 25.164, and 25.175). The term ``prepayment'' means that the 
proprietor pays the tax before the removal of the distilled spirits, 
wines, or beer from the facility. The term ``deferred payment'' means 
that the proprietor uses one of the return periods prescribed under 
section 5061(d) of the IRC to pay tax due for removals that occur 
during that period. Section 24.273 of the TTB regulations (27 CFR 
24.273) also authorizes a bonded wine cellar to file an excise tax 
return annually if the proprietor paid wine excise taxes in an amount 
less than $1,000 during the previous calendar year or if the proprietor 
of a newly established premises expects to pay less than $1,000 in wine 
excise taxes before the end of the calendar year. As discussed further 
below, this annual return period was authorized under the regulations 
prior to the enactment of the PATH Act and is not considered to be a 
deferred payment period for purposes of section 5061(d).
    The TTB regulations in parts 19, 24, and 25 also prescribe 
requirements for bonds that DSPs, certain wine premises, and breweries 
must furnish to TTB. Bonds must be guaranteed by an approved corporate 
surety or by deposit of collateral, such as certain acceptable 
securities, with TTB (see, e.g., 27 CFR 19.153 and 19.154). The 
regulations also include requirements relating to the ``penal sums'' of 
these bonds. The term ``penal sum'' refers to the amount of money 
guaranteed to be paid under the bond for tax obligations imposed by the 
IRC if the proprietor does not satisfy those obligations, such as the 
payment of tax due. The penal sum of a bond is generally based on the 
proprietor's liability for excise taxes imposed but not paid (see 27 
CFR 19.166, 24.148, and 25.93). In some cases involving distilled 
spirits and wine, the regulations require proprietors to furnish bonds 
that specifically cover the taxes on products removed for deferred 
payment of tax until the time the proprietor pays the tax (see 27 CFR 
19.164 and 24.146(b)).
    The TTB regulations in 27 CFR part 26 pertain to shipment of 
distilled spirits, wines, and beer (as well as certain products 
manufactured using distilled spirits, wines, and beer) to the United 
States from Puerto Rico and the U.S. Virgin Islands. Generally, 
manufacturers of these products in Puerto Rico and the U.S. Virgin 
Islands are not required to receive approval from TTB to operate. 
However, if manufacturers in Puerto Rico ship the products to the 
United States, they must pay tax to TTB unless a specific provision 
authorizes the shipment without paying the tax (see discussion in the 
next paragraph for examples of such shipments). The regulations in 27 
CFR part 26, subpart E, govern the payment of excise tax on products 
manufactured in Puerto Rico and shipped to the United States, and they 
contain bond requirements for persons who pay tax on a deferred basis 
using one of the tax periods prescribed under section 5061(d) the IRC. 
But because CBP (rather than TTB) collects taxes on products shipped to 
the United States from the U.S. Virgin Islands, the TTB regulations do 
not include provisions governing the payment of tax on products subject 
to 27 CFR part 26.
    The regulations in 27 CFR part 26 also include provisions governing 
the shipment to the United States of certain distilled spirits for 
industrial use, as well as certain products for industrial use made 
using distilled spirits. Persons in Puerto Rico and the U.S. Virgin 
Islands who manufacture these products may ship the products to the 
United States without incurring tax liability under the circumstances 
described in 27 CFR 26.36 and 26.201. Statutory authority relating to 
these types of tax-exempt shipments is set forth in section 5314 of the 
IRC (26 U.S.C. 5314). Under Sec.  26.36(b) and (c), distillers in 
Puerto Rico who ship tax-exempt distilled spirits to the United States 
under this authority are subject to the requirements in 27 CFR part 19 
governing DSPs, including requirements relating to receiving approval 
to operate and furnishing bonds. Distillers in the U.S. Virgin Islands 
who ship tax-exempt distilled spirits under Sec.  26.201(b) and (c) are 
not subject to 27 CFR part 19 (and thus do not furnish bonds to TTB 
under 27 CFR part 19 covering such shipments), but these distillers 
must qualify under regulations issued by the Governor of the U.S. 
Virgin Islands as provided in Sec.  26.201(b) and (c).
    The TTB regulations in 27 CFR part 27 relate to the importation of 
distilled spirits, wines, and beer into the United States from foreign 
countries. Persons who pay taxes to CBP on such imported

[[Page 1111]]

products under section 5061(d)(2) are not required to furnish bonds to 
TTB. However, qualified facilities in the United States that receive 
transfers of the products without payment of tax from customs custody 
must furnish bonds to TTB as provided in 27 CFR parts 19, 24, and 25 
(see 27 CFR part 27, subpart L; see also ATF Procedures 98-2 and 98-3 
issued by the Bureau of Alcohol, Tobacco and Firearms, TTB's 
predecessor agency).
    The TTB regulations in 27 CFR part 28 govern the exportation of 
distilled spirits, wines, and beer from the United States, including 
the exportation of taxpaid and non-taxpaid distilled spirits, wines, 
and beer. As prescribed in 27 CFR part 28, subparts I, K, and L, 
distilled spirits, wines, and beer on which taxes have been paid may be 
exported with benefit of drawback (see also 26 U.S.C. 5055 and 5062). 
Exportation with benefit of drawback refers to a procedure under which 
a person may file a claim for a payment from TTB equal to the taxes 
paid on the product based on the exportation of the product in 
accordance with the IRC provisions and the TTB regulations cited in 
this paragraph.
    Non-taxpaid distilled spirits, wines, and beer may also be removed 
for export from DSPs, bonded wine cellars (including bonded wineries), 
and breweries subject to certain requirements specified in 27 CFR part 
28. When the DSP, bonded wine cellar, or brewer acts as the exporter of 
the product for purposes of the TTB regulations, the bonds required 
under 27 CFR parts 19, 24, and 25, respectively, cover the tax 
liability associated with the alcohol (see 27 CFR 28.58-28.60, 28.92, 
28.122, 28.142, and 28.152). Alternatively, a person other than a DSP 
or bonded wine cellar may act as the exporter of the product in some 
circumstances if the person furnishes a bond as provided in 27 CFR 
28.61-28.64 (the regulations do not authorize persons other than 
brewers to act as exporters of non-taxpaid beer). In any case where 
non-taxpaid products are removed for export, the person acting as the 
exporter for purposes of the TTB regulations must also complete a TTB 
form documenting the exportation (TTB Form 5100.11 in the case of 
distilled spirits and wine, and TTB Form 5130.12 in the case of beer).

IV. Overview of the Amendments to the Regulations

    This document amends the TTB regulations in 27 CFR parts 19, 24, 
25, 26, 27, and 28 to implement the statutory provisions of section 332 
of the PATH Act. In addition, this rulemaking makes minor amendments to 
certain bond-related regulations in 27 CFR parts 18 and 30 relating to 
these statutory changes. This document also includes several technical 
amendments to update certain bond-related regulations. These amendments 
are discussed further below.

V. Major Amendments Relating to Tax Returns

A. Incorporation of Annual Return Filing Period

    TTB is amending the regulations in 27 CFR parts 19, 24, 25, and 26 
to incorporate the new annual tax return period provisions in section 
5061(d)(4)(A)(ii) of the IRC, which provides that the last day for 
deferred payment of tax is the 14th day after the last day of the 
calendar year in the case of any taxpayer who reasonably expects to be 
liable for not more than $1,000 in excise taxes imposed on distilled 
spirits, wines, and beer for the calendar year and who was liable for 
not more than $1,000 in such taxes the preceding calendar year. TTB is 
also amending the regulations to reflect new section 5061(d)(4)(B)(ii), 
which provides that the annual tax return period provision does not 
apply to taxpayers for any portion of the calendar year following the 
first date on which the aggregate amount of excise tax due during such 
calendar year exceeds $1,000. As discussed above, the annual tax return 
period provision provides an exception to the general rule in section 
5061(d) that requires deferred payment of such taxes using semimonthly 
periods. The specific regulations amended to reflect this new period 
are 27 CFR 19.235, 19.236, 24.271, 25.164, and 26.112. TTB is not 
amending any regulations in 27 CFR parts 27 and 28 to reflect this 
statutory change because these regulations do not contain provisions 
governing the deferred payment of taxes to TTB.
    In general, the amendments incorporating the new annual return 
period are modeled on existing provisions in Sec. Sec.  19.235, 19.236, 
24.271, 25.164, and 26.112 governing quarterly return periods, which 
are used by taxpayers who reasonably expect to be liable for not more 
than $50,000 in taxes imposed on distilled spirits, wines, and beer for 
the calendar year and who were liable for not more than $50,000 in the 
preceding calendar year. The statutory authority for quarterly return 
periods in section 5061(d)(4)(A) of the IRC (now designated as section 
5061(d)(4)(A)(i) under the PATH Act amendments) was originally enacted 
in 2005 as part of the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users, Public Law 109-59, 119 
Stat. 1144. In the 2006 temporary rule published in the Federal 
Register that originally implemented the quarterly return period 
procedure (T.D. TTB-41, 71 FR 5598 (2006)), TTB interpreted the 
statutory language in section 5061(d)(4)(A) as providing that the 
quarterly return period procedure was optional rather than mandatory, 
meaning that a taxpayer could choose to defer payment of excise tax 
using semimonthly return periods even if the taxpayer met the criteria 
for using quarterly periods. TTB noted that it was adopting this 
interpretation to provide flexibility for taxpayers, and TTB cited 
legislative history to show that the interpretation was a permissible 
construction of the statute. TTB subsequently finalized the regulations 
reflecting this interpretation (see T.D. TTB-94, 76 FR 52862 (2011)).
    Because the language in section 5061(d)(4)(A)(ii) providing for the 
annual return period procedure is identical in relevant respects to the 
language in 5061(d)(4)(A)(i) relating to quarterly returns, TTB 
interprets this language as also providing for the optional, rather 
than mandatory, use of annual return periods by taxpayers who meet the 
relevant criteria. TTB believes that adopting this interpretation will 
provide flexibility for taxpayers who are eligible to use annual return 
periods but who wish to pay taxes more frequently. This interpretation 
is reflected in the amendments to Sec. Sec.  19.235, 19.236, 24.271, 
25.164, and 26.112, which provide that eligible taxpayers ``may choose 
to use an annual return period'' [emphasis added].

B. Elimination of Non-Statutory Annual Return Period for Certain Wine 
Premises

    Under current 27 CFR 24.273, a wine premises proprietor is 
authorized to file an excise tax return annually if the proprietor paid 
wine excise taxes in an amount less than $1,000 during the previous 
calendar year or if the proprietor of a newly established premises 
expects to pay less than $1,000 in wine excise taxes before the end of 
the calendar year. An eligible proprietor must file such returns within 
30 days after the end of the calendar year. Historically, the 
regulations had authorized a proprietor to allocate up to $1,000 of the 
penal sum of the proprietor's wine bond to cover taxes on wine removed 
but not yet paid (see 27 CFR 24.146(a)). Because such removals up to 
$1,000 were not required to be covered by a tax deferral bond under 
Sec.  24.146(b), TTB previously took the position that the proprietor 
did not have

[[Page 1112]]

to pay taxes associated with the removals using one of the deferred 
payment periods (semimonthly or quarterly) authorized under section 
5061(d) (see T.D. TTB-41, 71 FR 5598, 5599 (02/06/2006)).
    Since the PATH Act established a new annual tax return period for 
proprietors who are liable for not more than $1,000 in excise taxes 
annually and eliminated the requirement to hold a tax deferral bond 
(see bond-related discussion below), TTB has determined that it is no 
longer necessary to retain the annual return filing provisions found in 
Sec.  24.273. Accordingly, TTB is amending the regulations to remove 
Sec.  24.273. Proprietors who previously filed tax returns annually 
under this section may instead file tax returns annually when 
authorized under Sec.  24.271(b)(1)(ii). Because the PATH Act 
provisions do not become effective until January 1, 2017, TTB is 
amending Sec.  24.271(b)(2) to clarify that a proprietor filing an 
annual return covering the 2016 calendar year must file the return not 
later than January 30, 2017, which would have been the due date under 
now-removed Sec.  24.273. TTB is also amending Sec. Sec.  24.271 and 
24.323 to eliminate references to Sec.  24.273, and TTB is amending 
Sec.  24.300 to remove the reference to Sec.  24.273 and replace it 
with a reference to the annual filing provision in Sec.  
24.271(b)(1)(ii).

VI. Bond Exemption Eligibility

    TTB is amending the regulations in 27 CFR parts 19, 24, 25, 26, and 
28 to implement new section 5551(d)(1) of the IRC, which provides that 
a taxpayer is not required to obtain certain bonds ``during any period 
to which [section 5061(d)(4)(A)] applies to a taxpayer (determined 
after application of [section 5061(d)(4)(B)] thereof)[.]'' Section 
5061(d)(4)(A) contains the quarterly and annual return filing 
provisions for taxpayers who are liable for not more than $50,000 per 
year in taxes imposed on distilled spirits, wines, and beer. The bond 
regulations amended in this temporary rule are 27 CFR 19.151, 24.146, 
25.91, 25.274, 26.66-26.68, 28.58, and 28.60-28.64. TTB is not amending 
the regulations in 27 CFR part 27 in this respect because those 
regulations do not impose bond requirements.

A. Circumstances Where Section 5061(d)(4)(A) Applies to a Taxpayer

    As discussed above, taxpayers may voluntarily choose to use 
semimonthly return periods for deferred payment of tax on distilled 
spirits, wines, and beer even if they meet the criteria in section 
5061(d)(4)(A) to pay taxes using quarterly or annual tax returns. These 
criteria are that the taxpayer must reasonably expect to be liable for 
not more than $1,000 in taxes (in the case of annual returns) or 
$50,000 in taxes (in the case of quarterly returns) for the calendar 
year and must have been liable for not more than these respective 
quantities in the preceding calendar year. Section 7701(a)(14) of the 
IRC (26 U.S.C. 7701(a)(14)) defines the term ``taxpayer'' as ``any 
person subject to an internal revenue tax.'' The term therefore 
includes persons who are liable for excise taxes imposed but not 
necessarily due for payment, as well as persons who are liable for 
payment of the tax. For purposes of the tax return filing provisions, 
the TTB regulations define the term ``taxpayer'' as an individual, 
corporation, partnership, or other entity that is assigned a single 
Employer Identification Number as defined in 26 CFR 301.7701-12 (see 
Sec. Sec.  19.235(d), 24.271(b), 25.164(c), and 26.112(b)).
    Since section 5061(d)(4)(A) does not mandate that taxpayers who 
defer payment of excise tax must use quarterly or annual return periods 
if they meet the criteria to use them, section 5061(d)(4)(A) applies to 
those taxpayers even if they choose to use semimonthly return periods 
instead. Accordingly, TTB does not interpret section 5551(d)(1) as 
requiring that taxpayers deferring payment of tax must use quarterly or 
annual return periods in order to be exempt from bond requirements 
under that provision. Even if they choose to use semimonthly periods, 
the taxpayers qualify for the bond exemption if they meet the criteria 
to pay taxes quarterly or annually under section 5061(d)(4)(A) and if 
they otherwise meet the bond exemption requirements in section 5551(d) 
as discussed further below. This interpretation is reflected in the 
amended regulations, which include the requirement that the taxpayer be 
``eligible to use an annual or quarterly return period'' to qualify for 
the bond exemption [emphasis added].
    In addition, because section 5061(d)(4)(A) does not apply to 
taxpayers who pay no taxes on distilled spirits, wines, or beer on a 
deferred basis, TTB interprets the phrase ``applies to a taxpayer'' in 
section 5551(d)(1) as requiring a taxpayer to pay some tax on a 
deferred basis to be exempt from bond requirements. If a taxpayer 
prepays tax but never defers payment of tax, or if a taxpayer never 
removes distilled spirits, wines, or beer on which taxes must be paid, 
the taxpayer is not exempt from bond requirements under section 
5551(d). This interpretation is also reflected in the regulations 
discussed above, which provide that the bond exemption only applies to 
a taxpayer who ``pays tax on a deferred basis[.]'' However, TTB also 
recognizes that taxpayers may not necessarily owe taxes during every 
deferred payment period that they choose to use. Therefore, the 
regulatory amendments also provide that a taxpayer is considered to be 
paying tax on a deferred basis for this purpose even if the taxpayer 
does not pay during every return period as long as the taxpayer intends 
to pay tax on a deferred basis in a future period.
    TTB also notes that section 5551(d)(1) ties a taxpayer's 
eligibility for the bond exemption to the taxpayer's liability for 
payment of taxes due rather than the taxpayer's liability for taxes 
imposed but not necessarily due. Under section 5551(d)(1), a taxpayer 
is eligible for the exemption only after application of section 
5061(d)(4)(B), which governs when the quarterly and annual return 
provisions in section 5061(d)(4)(A) no longer apply to a taxpayer. 
Section 5061(d)(4)(B) provides that the provisions do not apply to 
taxpayers ``for any portion of the calendar year following the first 
date on which the aggregate amount of tax due'' on distilled spirits, 
wines, and beer during such calendar year exceeds $50,000, in the case 
of quarterly returns, or $1,000, in the case of annual returns. Because 
the bond exemption is premised on the quantity of such taxes due for 
payment (rather than on the taxes imposed but not necessarily due), a 
taxpayer who otherwise meets the bond exemption requirements in section 
5551(d)(1) is not ineligible for the exemption solely based on the fact 
that the taxpayer's liability for taxes imposed but not due exceeds 
$50,000 annually.
    As discussed above, taxpayers may be liable for taxes imposed on 
distilled spirits, wines, and beer based on producing the products in 
the United States, importing the products into the United States from 
foreign countries, bringing the products into the United States from 
Puerto Rico and the U.S. Virgin Islands, or receiving certain transfers 
of non-taxpaid products. These taxpayers are liable for taxes imposed 
until they either pay the taxes due or take some other action for which 
the IRC relieves the taxpayer of the liability.

B. Types of Alcohol Subject to the Exemption

    During any period described above for which 5061(d)(4)(A) applies 
to a taxpayer, section 5551(d)(1) provides that such taxpayer ``shall 
not be required to furnish any bond covering

[[Page 1113]]

operations or withdrawals of distilled spirits or wines for 
nonindustrial use or of beer.'' As described above, the IRC references 
the industrial use of certain types of alcohol. In addition, the FAA 
Act applies to distilled spirits and wine for nonindustrial use but 
does not apply to distilled spirits and wine for industrial use. The 
TTB regulations in 27 CFR part 1, subpart D define the nonindustrial 
and industrial uses of these two types of alcohol for purposes of the 
FAA Act. Under the regulations, the term ``nonindustrial use'' 
includes, but is not limited to, all uses of distilled spirits and wine 
for alcohol beverage purposes (see 27 CFR 1.70 and 1.71). Under Sec.  
1.70, the term ``industrial use'' includes only those uses specifically 
enumerated as such in the regulations. These industrial uses include 
the use of distilled spirits free of tax under the IRC for certain 
nonbeverage purposes, the use of wine without payment of tax for the 
production of vinegar, and the use of distilled spirits and wine for 
experimental purposes and in the manufacture of specified products that 
are unfit for beverage purposes (see 27 CFR 1.60-1.62).
    TTB interprets the term ``nonindustrial use'' in section 5551(d)(1) 
as being synonymous with the same term in the FAA Act and the TTB 
regulations in 27 CFR part 1, subpart D. Therefore, a person is 
eligible for the bond exemption in section 5551(d)(1) with respect to 
distilled spirits and wine only to the extent the distilled spirits and 
wine are for nonindustrial use within the meaning of the FAA Act and 
these TTB regulations. The amendments to the bond regulations described 
above incorporate this interpretation by defining the terms 
``nonindustrial use'' and ``industrial use'' with reference to the 
provisions in 27 CFR part 1, subpart D.
    TTB also recognizes that some proprietors engage in operations and 
withdrawals of distilled spirits and wine both for nonindustrial and 
industrial use. Because such proprietors must obtain bonds to cover 
such alcohol for industrial use as otherwise provided in the IRC, even 
if they are exempt from bond requirements under section 5551(d) with 
respect to distilled spirits and wine for nonindustrial use, the 
regulatory amendments prescribe rules for proprietors to determine the 
relevant use of these types of alcohol for this purpose. In the case of 
proprietors of DSPs and bonded wine cellars (including bonded wineries) 
who conduct both types of operations, the amendments in Sec. Sec.  
19.151(d) and 24.146(d) provide that the alcohol is considered to be 
for industrial use unless the proprietor designates the alcohol as 
solely for nonindustrial use at a specified time after production of 
the alcohol or upon receiving the alcohol. TTB has not incorporated a 
similar rule in the regulations in 27 CFR parts 26 and 28 that impose 
bond requirements because those bonds apply to distilled spirits and 
wine shipped to the United States or removed for exportation, rather 
than to distilled spirits and wine produced or received at the 
premises. Therefore, the determination pertaining to industrial use, 
under 27 CFR parts 26 and 28, is made when the alcohol is shipped or 
removed.

C. Summary of Eligibility Criteria for the Bond Exemption

    This section summarizes the discussion above regarding which 
taxpayers are eligible for the bond exemption under section 5551(d)(1) 
of the IRC. Taxpayers must meet the following requirements to be 
eligible for the bond exemption:
     Taxpayers must be eligible to pay taxes quarterly or 
annually under section 5061(d)(4)(A) of the IRC. A taxpayer is eligible 
to pay taxes quarterly or annually under this provision if the taxpayer 
reasonably expects to be liable for not more than $50,000 in excise 
taxes imposed with respect to distilled spirits, wines, and beer for 
the calendar year and was liable for not more than $50,000 in such 
taxes in the preceding calendar year. A taxpayer is eligible for the 
bond exemption if the taxpayer chooses to pay taxes using semimonthly 
return periods as long as the taxpayer is eligible to use quarterly or 
annual return periods and otherwise meets the criteria for the 
exemption. For purposes of this requirement, the taxpayer's liability 
is determined based on taxes due as a result of removals or shipments 
for which the IRC requires payment of the tax, rather than on taxes 
imposed but not necessarily due for payment.
     Taxpayers must pay tax on distilled spirits, wines, or 
beer on a deferred basis. A taxpayer who never pays tax on a deferred 
basis is not exempt from bond requirements. This category of taxpayers 
who are ineligible for the exemption includes taxpayers who solely 
prepay taxes or who never remove distilled spirits, wines, or beer on 
which taxes must be paid.
     Taxpayers are exempt from bond requirements with respect 
to distilled spirits and wine only to the extent those products are for 
nonindustrial use. The nonindustrial uses of distilled spirits and wine 
are defined in 27 CFR part 1, subpart D. The term ``nonindustrial use'' 
includes, but is not limited to, all uses of distilled spirits and wine 
for alcohol beverage purposes.

VII. Other Bond-Related Amendments

A. Retention of Bond-Related Terms in the Regulations

    Section 5551(d)(2) of the IRC, as amended by the PATH Act, provides 
that taxpayers exempt from bond requirements under section 5551(d)(1) 
``shall be treated as if sufficient bond has been furnished for 
purposes of covering operations and withdrawals of distilled spirits or 
wines for nonindustrial use or of beer for purposes of any requirements 
relating to bonds under [chapter 51 of the IRC].'' The PATH Act 
amendments did not eliminate bond-related terms in chapter 51 of the 
IRC. Accordingly, TTB is not removing bond-related terms from the 
regulations. Instead, this temporary rule amends existing definitions 
of these terms or adds new definitions of them to provide that the 
terms apply to taxpayers even if they are exempt from bond requirements 
under section 5551(d)(1).
    First, TTB is amending definitions that identify certain premises 
as ``bonded'' so that the definitions include taxpayers who are exempt 
from bond requirements under section 5551(d)(1). These terms include 
the ``bonded premises'' of a distilled spirits plant, ``bonded 
winery,'' ``bonded wine cellar,'' and ``bonded wine warehouse.'' 
Therefore, these premises will still be described as ``bonded'' under 
the regulations even if the proprietor is not required to obtain a 
bond. The amended definitions are in 27 CFR 19.1, 24.10, 25.11, 26.11, 
27.11, and 28.11.
    Second, TTB is amending or adding bond-related definitions in the 
regulatory sections cited above that pertain to removals and receipts 
of distilled spirits, wines, and beer from certain premises subject to 
TTB regulation. These terms include transfers of products ``in bond,'' 
removals of products ``from bond,'' and returns of products ``to 
bond.'' As discussed above, the IRC requires certain persons who are 
liable for tax to provide bonds, which cover the tax liability 
associated with the products until that liability is relieved under the 
IRC. Prior to the PATH Act amendments, these types of regulatory terms 
described transactions where a bond covered the tax liability 
associated with the distilled spirits, wines, or beer removed or 
received. For example, transfers in bond are transfers of non-taxpaid 
products between certain premises (see, e.g., 27 CFR 19.402 and 
24.280); removals from bond are

[[Page 1114]]

removals of previously non-taxpaid products from certain premises, 
including withdrawals on determination of tax (see, e.g., Sec. Sec.  
19.229, 24.271, and 25.164); and returns to bond include receipts of 
previously taxpaid products on certain premises for which the IRC 
authorizes the proprietor of the premises to file a claim for credit or 
refund of the tax (see, e.g., 27 CFR 19.452). Under the amended 
definitions, these terms describe removals and receipts for which the 
proprietor is liable for the tax, even if the proprietor is not 
required to obtain a bond under section 5551(d)(1).

B. Incorporation of Cash Bond Requirements

    The current bond regulations in 27 CFR parts 19, 24, 25, 26, and 28 
provide that bonds must be guaranteed by an approved corporate surety 
or by deposit of collateral, such as certain acceptable securities, 
with TTB. Historically, TTB has also authorized proprietors to submit 
``cash bonds,'' which are bonds guaranteed by the deposit of cash or 
its equivalent as collateral. For this purpose, cash equivalents 
include money orders, cashier's checks, or personal checks. TTB policy 
has been that the cash (or its equivalent) deposited must be no less 
than the penal sums of the required bonds. The current regulation at 27 
CFR 24.151 includes cash bond provisions applicable to certain wine 
premises, but other TTB regulations do not include such provisions.
    TTB believes it is appropriate to incorporate its existing cash 
bond policy into the regulations in 27 CFR parts 19, 25, 26, and 28. 
Accordingly, TTB is amending Sec. Sec.  19.154, 25.98, 26.63, 26.74, 
28.53, and 28.74 to reflect this policy. Consistent with the provisions 
in the current regulations governing collateral bonds guaranteed by the 
deposit of certain acceptable securities (which are also in Sec. Sec.  
19.154, 25.98, 26.63, 26.74, 28.53, and 28.74), the cash bond 
provisions provide that bonds may be released once liability under the 
bond is terminated.

C. Brewers Holding Bonds With Flat $1,000 Penal Sums

    In 2012, TTB published a temporary rule in the Federal Register 
that authorized a flat penal sum of $1,000 for bonds held by certain 
brewers who reasonably expected to be liable for not more than $50,000 
in excise taxes for the calendar year and who were liable for not more 
than $50,000 in such taxes for the preceding calendar year (T.D. TTB-
109, 77 FR 72939 (12/07/2012)). Prior to the effective date of that 
temporary rule, the penal sums of bonds held by these brewers were 
based on a percentage of the brewer's expected maximum tax liability 
for the year, and the bond penal sums for a brewer were generally 
higher if the brewer paid taxes using quarterly return periods rather 
than semimonthly return periods. Because TTB concluded that authorizing 
a flat penal sum of $1,000 for these brewers did not pose a risk to the 
revenue, the temporary rule authorized this flat penal sum under Sec.  
25.93 if the brewers paid taxes using quarterly return periods in order 
to reduce their tax return filing burdens. In the same issue of the 
Federal Register, TTB published a notice of proposed rulemaking that 
included a proposed amendment to Sec.  25.164 that incorporated the 
quarterly filing requirement for brewers holding bonds with flat $1,000 
penal sums (Notice No. 131, 77 FR 72999 (2012)). TTB published a final 
rule in 2014 that adopted the flat $1,000 penal sum provision in Sec.  
25.93 as a permanent regulatory change and that finalized the amendment 
to Sec.  25.164 that TTB proposed in the 2012 notice of proposed 
rulemaking.
    Section 5551(d)(1) of the IRC, as amended by the PATH Act, 
eliminates bond requirements for brewers who reasonably expect to be 
liable for not more than $50,000 in excise taxes for the calendar year 
and who were liable for not more than $50,000 in such taxes for the 
preceding calendar year. Therefore, brewers who were eligible to hold 
bonds with flat $1,000 penal sums under the rulemakings described in 
the previous paragraph are now eligible for the bond exemption under 
section 5551(d)(1). Accordingly, TTB is amending Sec. Sec.  25.93 and 
25.164 to incorporate language relating to a brewer's eligibility for 
this bond exemption and to provide that such eligible brewers may 
choose to pay taxes using quarterly or annual return periods if they 
meet the criteria to use those periods. Since it is no longer necessary 
for such brewers to obtain a bond with a flat $1,000 penal sum because 
those brewers can instead qualify for the bond exemption, such brewers 
may choose to pay taxes quarterly or annually without having to obtain 
a bond with a higher penal sum.

D. Qualification for the Bond Exemption by Applicants

    TTB is amending the regulations in 27 CFR parts 19, 24, and 25 to 
require that persons who apply to qualify as DSPs, bonded wine cellars 
(including bonded wineries), and breweries must state in their 
applications whether they are exempt from bond requirements under 
section 5551(d). TTB is not amending the regulations in 27 CFR parts 
26, 27, and 28 in this respect because those regulations do not require 
persons to furnish bonds in order merely to qualify to operate with 
TTB. For example, although certain exporters who must provide bonds as 
provided in Sec. Sec.  28.61-28.64 may be required to obtain a basic 
permit as a wholesaler under the FAA Act and the TTB regulations (see 
27 U.S.C. 203(c) and 27 CFR part 1), such exporters are not required to 
furnish a bond when they apply for this type of permit.
    TTB is amending 27 CFR 19.73, 24.109, and 25.62 to require a 
statement in each type of application whether or not the applicant is 
required to provide a bond. As discussed above, eligibility for the 
bond exemption is determined under amended Sec. Sec.  19.151, 24.146, 
and 25.91. TTB is also modifying the relevant application forms to 
include a new section where applicants specify whether they are 
eligible for the exemption. These forms are TTB Form 5110.41 
(Registration of Distilled Spirits Plant), TTB Form 5120.25 
(Application to Establish and Operate Wine Premises), and TTB Form 
5130.10 (Brewer's Notice). Applicants may complete these forms using 
TTB's Permits Online system, which is TTB's electronic permit 
application system available at ttb.gov. The new sections in these 
forms spell out the criteria for eligibility for the bond exemption as 
provided in Sec. Sec.  19.151, 24.146, and 25.91.

E. Qualification for the Bond Exemption by Existing Proprietors

    There are two circumstances where an existing proprietor who holds 
a bond required under 27 CFR parts 19, 24, and 25 may subsequently 
become exempt from those bond requirements under section 5551(d)(1) of 
the IRC. First, since the bond exemption does not apply until January 
1, 2017 (see section 332(c) of the PATH Act), such proprietors who 
receive TTB approval to operate prior to that date will hold a bond 
even if the bond exemption provision applies to them starting on that 
date. Second, proprietors who receive TTB approval to operate no 
earlier than January 1, 2017 must hold a bond if they are ineligible 
for the bond exemption. For example, if a proprietor receives approval 
to operate in 2017 and reasonably expects to be liable for more than 
$50,000 in excise taxes for that year, the proprietor must furnish a 
bond. However, that proprietor may become exempt from bond requirements 
in the future if the proprietor meets the

[[Page 1115]]

requirements for the exemption under section 5551(d)(1). This may occur 
if the proprietor, in addition to meeting any other applicable 
requirements under section 5551(d)(1) (see ``Bond Exemption 
Eligibility'' section above), reasonably expects to be liable for not 
more than $50,000 in excise taxes for a calendar year and is liable for 
not more than $50,000 in the preceding calendar year.
    TTB is amending the regulations to provide procedures for such 
proprietors to terminate their bonds when they become exempt from these 
requirements. This temporary rule adds new regulations at 27 CFR 
19.136, 24.132, and 25.79 to provide that, in order to terminate their 
bonds, proprietors must file amendments to their TTB approvals to 
operate using the application forms described above (TTB Forms 5110.41, 
5120.25, and 5130.10). Under the current regulations, these forms are 
used both for filing original applications and for filing amendments. 
Proprietors who apply to terminate their bonds using this process will 
complete the same new sections of the forms that applicants use to 
select whether they are eligible for the exemption when they originally 
seek TTB approval to operate. TTB is also amending the existing bond 
termination regulation at 27 CFR 19.170, and adding new regulations at 
24.160 and 25.106, to provide that proprietors may apply to terminate 
their bonds when they become exempt under these circumstances.

F. New Bonds for Previously Exempt Proprietors

    TTB is also amending the regulations to provide new procedures for 
certain proprietors to furnish bonds if they were previously bond-
exempt but later become required to furnish a bond. New Sec. Sec.  
19.136, 24.132, and 25.79 (which were first discussed in the previous 
section) provide that existing proprietors must file amendments to 
their TTB approvals to operate using the aforementioned application 
forms if they become required to furnish a bond after having been 
exempt from such requirements. These procedures apply to proprietors of 
DSPs, bonded wine cellars (including bonded wineries), and breweries, 
all of whom must provide a bond to operate unless they are exempt under 
section 5551(d)(1).
    If any such proprietor is required to furnish a bond because the 
proprietor becomes liable for more than $50,000 in taxes with respect 
to distilled spirits, wines, and beer in a calendar year, the 
proprietor must obtain a bond to continue operating. Under the IRC, the 
proprietor must furnish the bond following the first date on which the 
aggregate amount of excise tax due during the calendar year exceeds 
$50,000, which is the date identified in section 5061(d)(4)(B) on which 
the proprietor must begin using semimonthly return periods to defer 
payment of tax. As discussed above, the bond exemption is linked to 
this requirement to use semimonthly periods for deferred payment of 
tax.
    In these circumstances, TTB believes it is appropriate to provide a 
grace period for ``operations'' bonds during which the previously bond-
exempt proprietor may continue to operate until TTB takes action on the 
bond application. Under amended 27 CFR 19.168, 24.154, and 25.95, such 
proprietors will be treated as having furnished the required bond to 
operate if the proprietor submits the bond application to TTB no later 
than 30 days following the first date on which the aggregate amount of 
excise tax due from the proprietor during the relevant calendar year 
exceeds $50,000. If the proprietor submits the application for the bond 
no later than 30 days following the first date on which the aggregate 
amount of excise tax due from the proprietor during the relevant 
calendar year exceeds $50,000, the proprietor will be treated as having 
furnished the required bond until TTB approves or disapproves it.
    The grace period authorized in these regulations does not apply to 
``withdrawal'' bonds required under 27 CFR parts 19, 24, and 25 that 
cover removals of distilled spirits, wines, or beer for deferred 
payment of tax. If a proprietor becomes required to furnish a bond 
covering such removals after having been exempt from such requirements, 
the proprietor may remove products on prepayment (rather than on 
deferred payment) of tax during the time TTB considers the bond 
application (see Sec. Sec.  19.229(b), 24.275, and 25.175). Because 
bonds covering tax-deferred removals are not required for such 
proprietors to continue operations while TTB considers the bond 
application, TTB believes that it is not necessary to provide a grace 
period under these circumstances.
    In the case of a proprietor of a bonded wine cellar using the grace 
period under Sec.  24.154, the proprietor may remove wine on which the 
tax has been determined, but not paid, to the extent that the 
proprietor's liability for tax on those removals does not exceed 
$1,000. As discussed above, TTB has historically authorized proprietors 
to allocate up to $1,000 of the penal sum of the proprietor's wine bond 
to cover taxes on wine removed but not yet paid. Since the regulations 
have not previously required such proprietors to pay taxes associated 
with these removals using one of the deferred payment periods specified 
in section 5061(d), TTB believes it is appropriate to extend the grace 
period provision to such removals if the proprietor's liability for 
payment does not exceed $1,000.
    Finally, TTB is not amending the regulations to provide grace 
periods for bonds required under 27 CFR parts 26 and 28 that cover, 
respectively, tax-deferred shipments from Puerto Rico and non-taxpaid 
exportations from the United States. In the case of shipments from 
Puerto Rico, the proprietor may ship the distilled spirits, wines, or 
beer to the United States upon prepayment of the tax during the time 
TTB considers the bond application (see 27 CFR 26.81, 26.96, and 
26.105). In the case of bonds required under part 28, the exporter's 
transactions will be limited to taxpaid products while TTB considers 
the bond application. Because these bonds are not required for such 
proprietors to continue operations while TTB considers the bond 
application, TTB believes that it is not necessary to provide a grace 
period under these circumstances.

VIII. Miscellaneous and Technical Amendments

A. Amendments to 27 CFR Parts 18 and 30

    This temporary rule amends several provisions in 27 CFR part 18 
(``Production of Volatile Fruit-Flavor Concentrate'') and 27 CFR part 
30 (``Gauging Manual'') to reflect the other regulatory amendments 
discussed above. TTB is amending 27 CFR 18.39(c) and 18.40(c) to 
provide that proprietors of DSPs and bonded wine cellars are not 
required to file bonds covering alternation of their premises for use 
as volatile fruit-flavor concentrate plants if the proprietors are not 
required to hold bonds under 27 CFR parts 19 and 24. Since 27 CFR part 
18 does not impose bond requirements, no bond is required for the 
alternation if the proprietor is exempt under 27 CFR parts 19 and 24.
    In 27 CFR part 30, which governs the gauging of distilled spirits 
at DSPs, TTB is adding a definition of ``bonded premises'' in 27 CFR 
30.11. Consistent with the amended definition of this term in Sec.  
19.1 as discussed above, the new definition provides that the term 
includes the premises of a DSP even if the proprietor has not provided 
a bond as authorized under the exemption set forth in Sec.  19.151(d). 
Related to this amendment, TTB is also modifying the

[[Page 1116]]

phrase ``withdrawn from bond'' in 27 CFR 30.36 so that it instead reads 
``from bonded premises'' in order to clarify that the regulation 
applies to distilled spirits withdrawn from the bonded premises of 
DSPs, including such premises of DSPs that are not required to provide 
a bond under Sec.  19.151(d).

B. Technical Amendments Relating to Surety and Collateral Bonds

    TTB is amending regulations in 27 CFR parts 19, 24, 25, 26, and 28 
to update information relating to surety and collateral bonds. First, 
TTB is amending 27 CFR 19.153, 19.168, 24.149, 25.98, 26.62, and 28.52 
to update information on how to obtain copies of Treasury Department 
Circular 570, which contains a list of approved corporate sureties. TTB 
is also amending these regulations to update Web site address 
references for obtaining copies of this circular. Second, TTB is 
amending 27 CFR 19.154, 19.699, 24.4, 24.151, 25.4, and 26.63 to update 
information about obtaining collateral bonds guaranteed by acceptable 
securities. These amendments update the title of the agency currently 
responsible for publishing this information (the Treasury Department's 
Bureau of the Fiscal Service (BFS)), the Web site address references 
for certain BFS Web sites, and the title and citation for 31 CFR part 
225 (which contains regulations governing such securities).

C. Updates to Form Numbers in 27 CFR Parts 26 and 28

    Certain regulations in 27 CFR parts 26 and 28 pertaining to tax 
payments and bonds impacted by this rulemaking contain references to 
outdated form numbers. TTB is amending these regulations so that they 
include the updated form numbers. The amended regulations are 27 CFR 
24.152, 25.77, 25.92, 26.64, 26.67, 26.68, 26.68a, 26.75, 26.76, 28.54, 
28.61, 28.62, 28.63, 28.64, 28.70, 28.71, 28.72, 28.73, 28.214, 28.215, 
28.250, 28.303, 28.317, and 28.333. The updated form numbers are TTB 
Forms 5000.23 PR, 5100.12, 5000.18, 5100.21, 5100.25, 5100.30, 5110.67, 
5120.20, 5120.24, 5120.25, 5120.32, 5130.6, 5130.16, 5170.7, and 
5620.8.

D. Obsolete Regulations in 27 CFR Part 28 Relating to TTB Form 5110.68

    Current 27 CFR 28.65 requires a drawback claimant to file a bond on 
TTB Form 5110.68 where the claimant desires drawback of tax paid on 
exported distilled spirits or wines prior to TTB's receipt of a 
certified copy of TTB Form 5110.30 or 5120.24. These latter two forms 
are drawback claim forms that include certifications that the product 
was exported. The statutory authority for this type of drawback is 
section 5062(b) of the IRC (26 U.S.C. 5062(b)). Historically, the 
purpose of the requirement in Sec.  28.65 to file a bond on TTB Form 
5110.68 was to protect the revenue associated with the drawback paid to 
the claimant until the distilled spirits or wines were certified to be 
exported.
    TTB has determined that it is no longer necessary for revenue 
protection purposes to require bonds on TTB Form 5110.68 to cover 
drawback paid for exported distilled spirits and wine. TTB currently 
approves claims submitted on TTB Form 5110.30 or 5120.24 when it 
receives adequate evidence that the product was exported and that the 
industry member is otherwise entitled to drawback based on the 
exportation. Therefore, it is no longer necessary to require bonds on 
TTB Form 5110.68 to cover drawback paid prior to certification that the 
product was exported. For this reason, TTB no longer maintains active 
approval from the Office of Management and Budget under the Paperwork 
Reduction Act of 1995 to require the filing of bonds on TTB Form 
5110.68. Accordingly, TTB is amending the regulations to remove Sec.  
28.65. TTB is also amending the regulations to remove 27 CFR 28.331 and 
28.332, which apply solely to drawback claims supported by this type of 
bond. The regulations continue to include 27 CFR 28.333 governing such 
claims that are not supported by this type of bond. However, TTB is 
amending Sec.  28.333 to remove outdated references to TTB Form 
5110.68. Finally, TTB is also removing other references to this bond 
form in 27 CFR 28.71, 28.72, and 28.250.

IX. Public Participation

    To submit comments on the temporary regulations contained in this 
document, which TTB is proposing to make permanent, please refer to the 
related notice of proposed rulemaking, Notice No. 167, published in the 
Proposed Rules section of this issue of the Federal Register.

X. Regulatory Analyses and Notices

A. Regulatory Flexibility Act

    In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.), TTB certifies that this temporary rule will not have a 
significant economic impact on a substantial number of small entities. 
The temporary rule will not impose, or otherwise cause, a significant 
increase in reporting, recordkeeping, or other compliance burdens on a 
substantial number of small entities. The temporary rule implements 
certain changes made to the Internal Revenue Code of 1986 by the 
Protecting Americans from Tax Hikes Act of 2015 (see Public Law 114-
113, Division Q, section 332). These statutory changes eliminate bond 
requirements and reduce tax return filing frequency for certain 
eligible taxpayers. The regulatory amendments provide for taxpayers to 
use TTB's existing qualification procedures to establish that they are 
exempt from bond requirements, and any increased burden associated with 
establishing eligibility for the exemption flows directly from the 
statutory changes that prescribe the criteria for eligibility for the 
exemption. Pursuant to section 7805(f) of the IRC (26 U.S.C. 7805(f)), 
TTB will submit the temporary regulations to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on the impact 
of the temporary regulations on small businesses.

B. Executive Order 12866

    Certain TTB regulations issued under the IRC, including this one, 
are exempt from the requirements of Executive Order 12866, as 
supplemented and reaffirmed by Executive Order 13563. Therefore, a 
regulatory impact assessment is not required.

C. Paperwork Reduction Act

    Regulations addressed in this temporary rule contain current 
collections of information that have been previously reviewed and 
approved by the Office of Management and Budget (OMB) in accordance 
with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3507) and 
assigned control numbers 1513-0005, 1513-0009, 1513-0015, 1513-0031, 
1513-0037, 1513-0038, 1513-0048, 1513-0050, 1513-0083, 1513-0123, 1513-
0125, and 1513-0135. An agency may not conduct or sponsor, and a person 
is not required to respond to, a collection of information unless it 
displays a valid control number assigned by OMB.
    The temporary rule implements certain changes made to the Internal 
Revenue Code of 1986 by the Protecting Americans from Tax Hikes Act of 
2015 (see Public Law 114-113, Division Q, section 332). These statutory 
changes eliminate bond requirements and reduce tax return filing 
frequency for certain eligible taxpayers. As described further below, 
the temporary rule alters some of these information collections.
    The regulations in this temporary rule do not include any 
alterations to control numbers 1513-0031, 1513-0050, and

[[Page 1117]]

1513-0135. These information collections cover TTB Form 5100.12 
(Specific Transportation Bond--Distilled Spirits or Wines Withdrawn for 
Transportation to Manufacturing Bonded Warehouse--Class Six), TTB Form 
5100.25 (Continuing Export Bond for Distilled Spirits and Wine), TTB 
Form 5110.50 (Tax Deferral Bond--Distilled Spirits (Puerto Rico), and 
TTB Form 5110.67 (Continuing Transportation Bond--Distilled Spirits and 
Wines Withdrawn for Transportation to Manufacturing Bonded Warehouse--
Class Six). The temporary rule amends certain regulations that 
reference these forms (see 27 CFR 26.66, 26.80, 28.61, 28.63, 28.64, 
28.70, 28.71, 28.72, and 28.73). However, TTB is not changing these 
bond forms as part of this regulatory action, and TTB does not estimate 
that this temporary rule will alter paperwork burdens associated with 
these forms.
    This temporary rule involves a non-substantive change to control 
number 1513-0037, which covers TTB Form 5100.11 (Withdrawal of Spirits, 
Specially Denatured Spirits, or Wines for Exportation). The temporary 
rule amends regulations that reference this form (see 27 CFR 28.22, 
28.70, 28.95, 28.96, 28.116, 28.117, 28.131, 28.132, and 28.250). TTB 
does not estimate that this temporary rule will alter the paperwork 
burdens associated with this form, but TTB is making a non-substantive 
change to the form by modifying some of the text on the form's first 
page. This change will provide guidance to users of the form about 
applicable bond requirements. TTB has submitted this change to OMB for 
review, and OMB has approved this non-substantive change.
    The regulations in this temporary include substantive changes to 
control numbers 1513-0005, 1513-0009, 1513-0015, 1513-0038, 1513-0048, 
1513-0083, 1513-0123, and 1513-0125. These changes are discussed 
further below. TTB has provided estimates to OMB regarding the burdens 
associated with the collections under this temporary rule, and OMB has 
reviewed and approved these estimates. Comments on the revisions should 
be sent to OMB at Office of Management and Budget, Attention: Desk 
Officer for the Department of the Treasury, Office of Information and 
Regulatory Affairs, Washington, DC 20503 or by email to 
OIRA_submissions@omb.eop.gov. A copy should also be sent to TTB by any 
of the methods previously described. Comments on the information 
collections should be submitted no later than March 6, 2017. Comments 
are specifically requested concerning:
     Whether the collections of information submitted to OMB 
are necessary for the proper performance of the functions of the 
Alcohol and Tobacco Tax and Trade Bureau, including whether the 
information will have practical utility;
     The accuracy of the estimated burdens associated with the 
collections of information submitted to OMB;
     How to enhance the quality, utility, and clarity of the 
information to be collected;
     How to minimize the burden of complying with the proposed 
revisions of the collections of information, including the application 
of automated collection techniques or other forms of information 
technology; and
     Estimates of capital or start-up costs and costs of 
operation, maintenance, and purchase of services to provide 
information.
1513-0005
    The regulations in the temporary rule contain alterations to the 
information collection currently approved under OMB control number 
1513-0005 (see 27 CFR 19.143, 25.62, 25.73, 25.77, 25.79, 25.81, 25.91, 
25.95, and 25.106). This control number covers TTB Form 5130.10 
(Brewer's Notice). The temporary rule includes regulations requiring 
that brewers who wish to apply for the bond exemption must file this 
form. In the case of existing brewers who wish to apply for the 
exemption beginning in 2017, these changes will result in a one-time 
increase in the filing of the form. These regulations are necessary for 
revenue protection purposes to ensure that bond-exempt brewers meet the 
legal criteria for the exemption. This information collection also 
covers other submissions by brewers unrelated to this rulemaking. 
Taking into account the regulatory amendments and other existing 
regulatory requirements, TTB estimates the burden associated with this 
information collection as follows:
     Estimated number of respondents: 6,298.
     Estimated annual frequency of responses: 6.
     Estimated average annual total burden hours: 32,091.
1513-0009
    The regulations in the temporary rule contain alterations to the 
information collection currently approved under OMB control number 
1513-0009 (see 27 CFR 18.40, 19.143, 24.105, 24.109, 24.135, 24.146, 
24.154, 25.81, 28.70, and 28.73). This control number covers TTB Form 
5120.25 (Application to Establish and Operate Wine Premises) and TTB 
Form 5120.36 (Wine Bond). The temporary rule includes regulations 
requiring that bonded wine cellars who wish to apply for the bond 
exemption must file this form to show they are eligible for the 
exemption. In the case of existing proprietors who wish to apply for 
the exemption beginning in 2017, these changes will result in a one-
time increase in the filing of the form. These regulations are 
necessary for revenue protection purposes to ensure that bond-exempt 
proprietors meet the legal criteria for the exemption. TTB also 
estimates that submissions of TTB Form 5120.36 will decrease as a 
result of the new bond exemption, since proprietors who are exempt will 
no longer be required to file the form. Taking into account the 
regulatory amendments and other existing regulatory requirements, TTB 
estimates the burden associated with this information collection as 
follows:
     Estimated number of respondents: 4,495.
     Estimated annual frequency of responses: 1.
     Estimated average annual total burden hours: 3,345.
1513-0015
    The regulations in the temporary rule contain alterations to the 
information collection currently approved under OMB control number 
1513-0015 (see 27 CFR 25.73, 25.77, 25.91, 25.95, 25.274, 28.60, and 
28.141). This control number covers TTB Form 5130.22 (Brewer's Bond), 
TTB Form 5130.23 (Brewer's Bond Continuation Certificate), TTB Form 
5130.25 (Brewer's Collateral Bond), and TTB Form 5130.27 (Brewer's 
Collateral Bond Continuation Certificate). TTB estimates that 
submissions of these forms will decrease as a result of the new bond 
exemption, since brewers who are exempt will no longer be required to 
file the forms. Taking into account the regulatory amendments and other 
existing regulatory requirements, TTB estimates the burden associated 
with this information collection as follows:
     Estimated number of respondents: 1,657.
     Estimated annual frequency of responses: 652.
     Estimated average annual total burden hours: 363.5.
1513-0038
    The regulations in the temporary rule contain alterations to the 
information collection currently approved under OMB control number 
1513-0038 (see 27 CFR 19.403). This control number covers TTB Form 
5100.16 (Application to Receive Spirits and/or Denatured

[[Page 1118]]

Spirits by Transfer in Bond). TTB does not estimate that this temporary 
rule will alter the paperwork burdens associated with this form, but 
TTB is amending the section of the form where the DSP proprietor 
describes the proprietor's bond coverage. These form amendments are 
necessary to reflect changes relating to the bond exemption for DSPs. 
TTB is also making a minor related change to one of the instructions on 
the form. Taking into account the regulatory amendments and other 
existing regulatory requirements, TTB estimates the burden associated 
with this information collection as follows:
     Estimated number of respondents: 250.
     Estimated annual frequency of responses: 6.
     Estimated average annual total burden hours: 228.
1513-0048
    The regulations in the temporary rule contain alterations to the 
information collection currently approved under OMB control number 
1513-0048 (see 27 CFR 18.39, 19.73, 19.116, 19.118, 19.136, 19.143, 
19.168, and 19.170). This control number covers TTB Form 5110.41 
(Registration of Distilled Spirits Plant). The temporary rule includes 
regulations requiring that DSP proprietors who wish to apply for the 
bond exemption must file this form to show they are eligible for the 
exemption. In the case of existing proprietors who wish to apply for 
the exemption beginning in 2017, these changes will result in a one-
time increase in the filing of the form. These regulations are 
necessary for revenue protection purposes to ensure that bond-exempt 
proprietors meet the legal criteria for the exemption. Taking into 
account the regulatory amendments and other existing regulatory 
requirements, TTB estimates the burden associated with this information 
collection as follows:
     Estimated number of respondents: 1,515.
     Estimated annual frequency of responses: 1.84.
     Estimated average annual total burden hours: 5,932.
1513-0083
    The regulations in the temporary rule contain alterations to the 
information collection currently approved under OMB control number 
1513-0083. This control number covers TTB Form 5000.24 (Excise Tax 
Return). TTB estimates that the paperwork burden associated with this 
collection will decrease under the temporary rule due to the 
establishment of a new annual tax return period for deferred payment of 
taxes on distilled spirits, wines, and beer. The burden reduction will 
result from eligible taxpayers paying taxes annually rather than 
quarterly or semimonthly. TTB also expects that additional taxpayers 
who are eligible to use quarterly or annual return periods will begin 
using those periods in lieu of semimonthly or quarterly return periods, 
respectively, which will also result in a reduction in paperwork 
burden. Once these taxpayers establish their eligibility for the bond 
exemption, such taxpayers paying taxes less frequently will not have 
the disincentive of being required to hold withdrawal bonds of higher 
penal sums to cover tax liability associated with withdrawals of tax-
determined product on which taxes have not yet been paid. This 
information collection also covers other submissions of TTB Form 
5000.24 that are unrelated to this rulemaking. Taking into account the 
regulatory amendments and other existing regulatory requirements, TTB 
estimates the burden associated with this information collection as 
follows:
     Estimated number of respondents: 18,479.
     Estimated annual frequency of responses: 6.2.
     Estimated average annual total burden hours: 85,888.
1513-0123
    The regulations in this temporary rule contain alterations to the 
information collection currently approved under OMB control number 
1513-0123 (see 27 CFR 26.80, 26.95, and 26.104). This control number 
covers TTB Form 5100.21 (Application, Permit, and Report--Wine and Beer 
(Puerto Rico)) and TTB Form 5110.51 (Application, Permit, and Report--
Distilled Spirits Products (Puerto Rico)). TTB does not estimate that 
this temporary rule will alter the paperwork burdens associated with 
these forms, but TTB is amending several sections of the forms to 
reflect changes relating to the new bond exemption. Taking into account 
the regulatory amendments and other existing regulatory requirements, 
TTB estimates the burden associated with this information collection as 
follows:
     Estimated number of respondents: 35.
     Estimated annual frequency of responses: 1.
     Estimated average annual total burden hours: 35.
1513-0125
    The regulations in the temporary rule contain alterations to the 
information collection currently approved under OMB control number 
1513-0125. This control number covers TTB Form 5110.56 (Distilled 
Spirits Bond). TTB estimates that submissions of this form will 
decrease as a result of the new bond exemption, since DSP proprietors 
who are exempt will no longer be required to file the form. Taking into 
account the regulatory amendments and other existing regulatory 
requirements, TTB estimates the burden associated with this information 
collection as follows:
     Estimated number of respondents: 358.
     Estimated annual frequency of responses: 2.
     Estimated average annual total burden hours: 716.

D. Inapplicability of Prior Notice and Comment and Delayed Effective 
Date Procedures

    TTB is issuing this temporary final rule without prior notice and 
comment pursuant to authority under 5 U.S.C. 553(b). This provision 
authorizes an agency to issue a rule without prior notice and comment 
when the agency for good cause finds that those procedures are 
``impracticable, unnecessary, or contrary to the public interest.'' 
Because this document implements provisions of a law that are effective 
on January 1, 2017, and because immediate guidance is necessary to 
implement these statutory provisions, it is found to be impracticable 
to issue this temporary rule with prior notice and comment. The 
temporary rule implements statutory changes that eliminate bond 
requirements and reduce tax return filing frequency for certain 
eligible taxpayers. These statutory changes reduce regulatory burdens 
on affected industry members, and the regulations in this temporary 
rule will allow such industry members to benefit from such changes.
    Pursuant to the provisions of 5 U.S.C. 553(d)(1) and (d)(3), TTB is 
issuing this temporary rule without a delayed effective date. As 
provided for in section 553(d)(1), the regulatory amendments recognize 
a statutory exemption from bond requirements and authorize a new 
voluntary annual tax return period. TTB has also determined that good 
cause exists under section 553(d)(3) to provide industry members with 
immediate guidance on procedures to apply for and obtain the bond 
exemption authorized under provisions of a law that are effective on 
January 1, 2017.

XI. Drafting Information

    Ben Birkhill of the Regulations and Rulings Division drafted this 
document with the assistance of other Alcohol and

[[Page 1119]]

Tobacco Tax and Trade Bureau personnel.

List of Subjects

27 CFR Part 18

    Alcohol and alcoholic beverages, Fruits, Reporting and 
recordkeeping requirements, Spices and flavorings.

27 CFR Part 19

    Administrative practice and procedure, Alcohol and alcoholic 
beverages, Authority delegations (Government agencies), Caribbean Basin 
initiative, Chemicals, Claims, Customs duties and inspection, 
Electronic funds transfers, Excise taxes, Exports, Gasohol, Imports, 
Labeling, Liquors, Packaging and containers, Puerto Rico, Reporting and 
recordkeeping requirements, Research, Security measures, Spices and 
flavorings, Stills, Surety bonds, Transportation, Vinegar, Virgin 
Islands, Warehouses, Wine.

27 CFR Part 24

    Administrative practice and procedure, Claims, Electronic funds 
transfers, Excise taxes, Exports, Food additives, Fruit juices, 
Labeling, Liquors, Packaging and containers, Reporting and 
recordkeeping requirements, Research, Scientific equipment, Spices and 
flavorings, Surety bonds, Vinegar, Warehouses, Wine.

27 CFR Part 25

    Beer, Claims, Electronic funds transfers, Excise taxes, Exports, 
Labeling, Packaging and containers, Reporting and recordkeeping 
requirements, Research, Surety bonds.

27 CFR Part 26

    Alcohol and alcoholic beverages, Caribbean Basin initiative, 
Claims, Customs duties and inspection, Electronic funds transfers, 
Excise taxes, Packaging and containers, Puerto Rico, Reporting and 
recordkeeping requirements, Surety bonds, Virgin Islands, Warehouses.

27 CFR Part 27

    Alcohol and alcoholic beverages, Beer, Cosmetics, Customs duties 
and inspection, Electronic funds transfers, Excise taxes, Imports, 
Labeling, Liquors, Packaging and containers, Reporting and 
recordkeeping requirements, Wine.

27 CFR Part 28

    Aircraft, Alcohol and alcoholic beverages, Armed forces, Beer, 
Claims, Excise taxes, Exports, Foreign trade zones, Labeling, Liquors, 
Packaging and containers, Reporting and recordkeeping requirements, 
Surety bonds, Vessels, Warehouses, Wine.

27 CFR Part 30

    Liquors, Scientific equipment.

Amendments to the Regulations

    For the reasons discussed in the preamble, TTB amends 27 CFR 
chapter I as follows:

PART 18--PRODUCTION OF VOLATILE FRUIT-FLAVOR CONCENTRATE

0
1. The authority citation for part 18 is revised to read as follows:

    Authority:  26 U.S.C. 5001, 5171-5173, 5178, 5179, 5203, 5351, 
5354, 5356, 5511, 5552, 6065, 6109, 7805.


Sec.  18.39   [Amended]

0
2. Section 18.39 is amended as follows:
0
a. In paragraph (c), by adding the words ``if the proprietor is 
required to hold a bond under Sec.  19.151 of this chapter to cover the 
distilled spirits plant premises subject to alternation'' before the 
period; and
0
b. By revising the Office of Management and Budget control number 
reference to read ``(Approved by the Office of Management and Budget 
under control number 1513-0006)''.


Sec.  18.40   [Amended]

0
3. Section 18.40 is amended as follows:
0
a. In paragraph (c), by adding the words ``if the proprietor is 
required to hold a bond under Sec.  24.146 of this chapter to cover the 
bonded wine cellar premises subject to alternation'' after the words 
``alternation of premises''; and
0
b. By revising the Office of Management and Budget control number 
reference to read ``(Approved by the Office of Management and Budget 
under control number 1513-0006)''.

PART 19--DISTILLED SPIRITS PLANTS

0
4. The authority citation for part 19 continues to read as follows:

    Authority:  19 U.S.C. 81c, 1311; 26 U.S.C. 5001, 5002, 5004-
5006, 5008, 5010, 5041, 5061, 5062, 5066, 5081, 5101, 5111-5114, 
5121-5124, 5142, 5143, 5146, 5148, 5171-5173, 5175, 5176, 5178-5181, 
5201-5204, 5206, 5207, 5211-5215, 5221-5223, 5231, 5232, 5235, 5236, 
5241-5243, 5271, 5273, 5301, 5311-5313, 5362, 5370, 5373, 5501-5505, 
5551-5555, 5559, 5561, 5562, 5601, 5612, 5682, 6001, 6065, 6109, 
6302, 6311, 6676, 6806, 7011, 7510, 7805; 31 U.S.C. 9301, 9303, 
9304, 9306.

0
5. Section 19.1 is amended as follows:
0
a. In the definition of ``Bonded premises'', by adding a second 
sentence;
0
b. By adding, in alphabetical order, a definition of ``From bond'';
0
c. In the definition of ``In bond'', by adding a second sentence;
0
d. By adding, in alphabetical order, a definition of ``To bond''; and
0
e. By removing the definition of ``TTB bond''.
    The additions read as follows:


Sec.  19.1   Definitions.

* * * * *
    Bonded premises. * * * This term includes premises described in the 
preceding sentence even if the proprietor, as authorized under the 
exemption set forth in Sec.  19.151(d), has not provided a bond for the 
premises.
* * * * *
    From bond. When used with reference to withdrawals of distilled 
spirits, this phrase includes withdrawals from the premises of a 
distilled spirits plant even if the proprietor, as authorized under the 
exemption set forth in Sec.  19.151(d), has not provided a bond for the 
premises.
* * * * *
    In bond. * * * Spirits, denatured spirits, articles, or wine are 
considered to be held under bond if they are held by a proprietor who 
is liable for the tax, even if the proprietor is not required to 
provide a bond under this chapter. * * *
* * * * *
    To bond. When used with reference to returns of distilled spirits, 
this phrase includes returns to the premises of a distilled spirits 
plant even if the proprietor, as authorized under the exemption set 
forth in Sec.  19.151(d), has not provided a bond for the premises.
* * * * *

0
6. Section 19.73 is amended as follows:
0
a. In paragraph (a)(14)(ii), by removing the word ``and'';
0
b. In paragraph (a)(15)(ii), by removing the period at the end of the 
text and adding in its place the word ``; and''; and
0
c. By adding paragraph (a)(16).
    The addition reads as follows:


Sec.  19.73   Information required in application for registration.

    (a) * * *
    (16) A statement whether the applicant is required to furnish a 
bond under Sec.  19.151.
* * * * *


Sec.  19.116   [Amended]

0
7. In Sec.  19.116, paragraph (a)(2)(ii) is amended by adding the words 
``, subject to the exemption provided in Sec.  19.151(d)'' before the 
semicolon.

[[Page 1120]]

Sec.  19.118   [Amended]

0
8. In Sec.  19.118, paragraph (a)(2) is amended by adding the words ``, 
subject to the exemption provided in Sec.  19.151(d)'' after the words 
``TTB F 5000.18''.


Sec.  19.132   [Amended]

0
9. In Sec.  19.132, paragraph (a)(2)(ii) is amended by adding the words 
``, subject to the exemption provided in Sec.  19.151(d)'' after the 
words ``the required bonds''.


Sec.  19.134   [Amended]

0
10. In Sec.  19.134, paragraph (b) is amended by adding the words ``, 
subject to the exemption provided in Sec.  19.151(d)'' after the words 
``TTB F 5000.18''.

0
11. Section 19.136 is added immediately after Sec.  19.135 and before 
the undesignated center heading to read as follows:


Sec.  19.136   Change in bond status.

    A proprietor must file TTB F 5110.41, Registration of Distilled 
Spirits Plant, to amend the registration relating to the proprietor's 
bond status if either of the following occurs:
    (a) A proprietor who has not furnished any bond becomes required to 
furnish a bond as provided under Sec.  19.168(b); or
    (b) A proprietor who has furnished a bond becomes exempt from bond 
requirements under Sec.  19.151(d) and chooses to terminate all bond 
coverage as provided under Sec.  19.170(e).


Sec.  19.141   [Amended]

0
12. Section 19.141 is amended as follows:
0
a. In paragraph (d)(2), by removing the word ``Execute'' and adding, in 
its place, the words ``Except where no bond is required under Sec.  
19.151(d), execute''; and
0
b. In paragraph (e)(2), by removing the words ``Must execute'' and 
adding, in their place, the words ``Except where no bond is required 
under Sec.  19.151(d), must execute''.


Sec.  19.142   [Amended]

0
13. In Sec.  19.142, paragraph (e) is amended by removing the words 
``TTB bond'' and adding, in their place, the words ``bonded premises''.

0
14. In Sec.  19.143, paragraph (b)(3) is amended by adding a second 
sentence to read as follows:


Sec.  19.143   Alternation for other purposes.

* * * * *
    (b) * * *
    (3) * * * This requirement does not apply if no bond is required 
under this chapter to cover the proposed alternation.
* * * * *

0
15. Section 19.151 is amended as follows:
0
a. In the first sentence of paragraph (a), by removing the words ``Any 
person'' and adding, in their place, ``Except as provided in paragraph 
(d) of this section, any person''; and
0
b. By adding paragraph (d).
    The addition reads as follows:


Sec.  19.151   General.

* * * * *
    (d) Bonds covering distilled spirits for nonindustrial use and 
industrial use--(1) Nonindustrial use. A proprietor who pays tax on a 
deferred basis under Sec.  19.235 is not required to provide a bond or 
bonds to cover operations and withdrawals of distilled spirits for 
nonindustrial use during any portion of a calendar year for which the 
proprietor is eligible to use an annual or quarterly return period 
under Sec.  19.235(b) or (c). For purposes of the preceding sentence, a 
proprietor is considered to be paying tax on a deferred basis even if 
the proprietor does not pay tax during every return period as long as 
the proprietor intends to pay tax in a future period. See Sec. Sec.  
19.73 and 19.136 for rules governing applying for this bond exemption. 
See Sec.  19.168(b) for rules governing when an existing proprietor who 
has not provided a bond under this paragraph must obtain bond coverage.
    (2) Industrial use. A proprietor is required to provide one or more 
bonds to cover operations and withdrawals of distilled spirits for 
industrial use even if the proprietor pays tax on a deferred basis 
under Sec.  19.235 and is eligible to use an annual or quarterly return 
period under Sec.  19.235(b) or (c). In the case of a proprietor whose 
operations involve distilled spirits for both nonindustrial and 
industrial use, distilled spirits are considered to be for industrial 
use for purposes of this paragraph unless the proprietor designates the 
spirits as being solely for nonindustrial use either upon taking the 
production gauge (see Sec.  19.304) or upon receiving the spirits and, 
in either case, does not thereafter mix the spirits with any spirits 
for industrial use.
    (3) Nonindustrial use and industrial use defined. See Sec.  19.472 
for the provisions defining the nonindustrial and industrial uses of 
distilled spirits.

0
16. In Sec.  19.153, paragraph (b) is revised to read as follows:


Sec.  19.153   Bonds guaranteed by a corporate surety.

* * * * *
    (b) How to find an approved surety. The Department of the Treasury 
publishes a list of approved corporate surety companies in Treasury 
Department Circular 570, Companies Holding Certificates of Authority as 
Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring 
Companies. Treasury Department Circular 570 is published in the Federal 
Register annually on the first business day in July, and supplemental 
changes are published periodically thereafter. The most recent circular 
and any supplemental changes to it may be viewed on the Bureau of the 
Fiscal Service Web site at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm.
* * * * *

0
17. Section 19.154 is revised to read as follows:


Sec.  19.154   Bond guaranteed by deposit of securities or cash 
(including cash equivalents).

    (a) Bond guaranteed by deposit of securities--(1) General. As an 
alternative to the corporate surety bond under Sec.  19.153, a person 
can file a bond that guarantees payment of the liability by pledging 
one or more acceptable negotiable securities. These securities must 
have a par value (face amount) equal to or greater than the penal sums 
of the required bonds. The pledged securities are held in the Federal 
Reserve Bank in a safekeeping account with TTB as the pledgee. Should 
the proprietor fail to pay one or more of the guaranteed liabilities, 
TTB can take action to sell the deposited securities to satisfy the 
debt. Pledged securities will be released if there are no outstanding 
liabilities when the bond is terminated. (See Sec.  19.170.)
    (2) Acceptable securities. Only public debt obligations of the 
United States, the principal and interest of which are unconditionally 
guaranteed by the United States Government, are acceptable for the 
purpose described in paragraph (a)(1) of this section. The Department 
of the Treasury and certain other United States Government agencies 
issue debt instruments that are acceptable as collateral, such as 
Treasury notes and Treasury bills. Savings bonds, certificates of 
deposit and letters of credit are not acceptable. A list of securities 
acceptable as collateral in lieu of surety bonds is available from the 
Bureau of the Fiscal Service. Current information and guidance from the 
Bureau of the Fiscal Service Web site may be found at https://www.fiscal.treasury.gov.
    (b) Bond guaranteed by deposit of cash or cash equivalent. As an

[[Page 1121]]

alternative to the corporate surety bond under Sec.  19.153, a person 
can file a bond that guarantees payment of the liability by submitting 
cash or its equivalent (including a money order, cashier's check, or 
personal check). Cash or its equivalent must be no less than the penal 
sums of the required bond. Cash equivalents must be payable to the 
Alcohol and Tobacco Tax and Trade Bureau. A bond described in this 
paragraph will be released if there are no outstanding liabilities when 
the bond is terminated. (See Sec.  19.170.)

(31 U.S.C. 9301, 9303; 31 CFR part 380)

Sec.  19.161   [Amended]

0
18. In Sec.  19.161, paragraph (a) is amended by removing the words 
``Any person'' and adding, in their place, ``Except as provided in 
Sec.  19.151(d), any person''.

0
19. In Sec.  19.164, the first sentence of paragraph (a) is revised to 
read as follows:


Sec.  19.164   Withdrawal bond.

    (a) * * * Except as provided in Sec.  19.151(d), a person must 
provide TTB with a withdrawal bond for a distilled spirits plant if the 
person intends to withdraw spirits from the distilled spirits plant 
upon determination of the taxes due on the spirits but before payment 
of the tax. * * *
* * * * *

0
20. Section 19.168 is amended as follows:
0
a. By revising the section heading;
0
b. By revising paragraph (a);
0
c. By redesignating paragraphs (b), (c), and (d) as paragraphs (a)(1), 
(a)(2), and (a)(3);
0
d. In the first sentence of redesignated paragraph (a)(1), by removing 
the words ``Circular 570'' and adding, in their place, the words 
``Department Circular 570 (see Sec.  19.153)''; and
0
e. By adding a new paragraph (b).
    The revisions and addition read as follows:


Sec.  19.168   Superseding bonds and new bonds for existing 
proprietors.

    (a) Superseding bonds. A new bond that replaces another bond is 
called a superseding bond. The proprietor must replace an existing bond 
with a superseding bond in any of the following circumstances:
* * * * *
    (b) New bonds for existing proprietors--(1) General. Subject to 
paragraph (b)(2) of this section, if an existing proprietor has not 
furnished a bond or bonds covering operations and withdrawals of 
distilled spirits for nonindustrial use because the proprietor was 
exempt from bond requirements under Sec.  19.151(d), the proprietor 
must furnish a bond or bonds as provided in this subpart beginning in 
any portion of a calendar year following the first date on which the 
aggregate amount of tax due from the proprietor during the calendar 
year exceeds $50,000. When furnishing the bond or bonds, the proprietor 
must also file an amendment to TTB F 5110.41, Registration of Distilled 
Spirits Plant, as provided in Sec.  19.136 to change the proprietor's 
bond status.
    (2) Grace period for bonds covering operations. An existing 
proprietor who must furnish an operations bond as provided in paragraph 
(b)(1) of this section will be treated as having furnished the required 
bond if the proprietor submits the bond on TTB F 5110.56 no later than 
30 days following the first date on which the aggregate amount of tax 
due from the proprietor during the relevant calendar year exceeds 
$50,000. The proprietor will be treated as having furnished the 
required operations bond for purposes of this paragraph until TTB 
approves or disapproves the bond.
    (3) Bonds covering withdrawals. Paragraph (b)(2) of this section 
does not apply to withdrawal bonds. If an existing proprietor must 
furnish a withdrawal bond as provided in paragraph (b)(1) of this 
section, the proprietor may not withdraw distilled spirits from the 
bonded premises on a tax deferred basis until TTB approves the 
withdrawal bond.
* * * * *

0
21. In Sec.  19.169, the section heading and paragraphs (a) and (b) are 
revised to read as follows:


Sec.  19.169  Effect of failure to furnish a superseding bond or a new 
bond.

    (a) Operations bond. Except as provided in Sec.  19.151(d), a 
person may not operate a distilled spirits plant without an operations 
bond. A person who does not submit an acceptable superseding operations 
bond when required to do so under Sec.  19.168(a) must immediately 
discontinue the activities to which the lapsed bond coverage relates 
upon lapse of the existing bond coverage. If a proprietor must furnish 
an operations bond under Sec.  19.168(b)(1) and does not submit an 
operations bond within the time prescribed in Sec.  19.168(b)(2), the 
proprietor must immediately discontinue the activities required to be 
covered by the operations bond.
    (b) Withdrawal bond. Except as provided in Sec.  19.151(d), a 
person may not defer payment of taxes on spirits withdrawn from a 
distilled spirits plant upon determination of tax without a withdrawal 
bond. If a person is required to submit a new or superseding withdrawal 
bond under Sec.  19.168, the person must submit the bond in accordance 
with that section. A person who does not submit and receive approval of 
an acceptable withdrawal bond when required to do so under Sec.  19.168 
may not withdraw distilled spirits from the bonded premises on a 
deferred basis. Upon lapse of the existing bond coverage, or upon the 
date a new bond is required under Sec.  19.168(b), the person must pay 
the tax at the time of withdrawal, except in the case of distilled 
spirits withdrawn free of tax or withdrawn without payment of tax under 
26 U.S.C. 5214 or withdrawn exempt from tax under 26 U.S.C. 7510.
* * * * *

0
22. Section 19.170 is amended as follows:
0
a. In paragraph (c), by removing the word ``or'' at the end of the 
text;
0
b. In paragraph (d), by removing the period at the end of the text and 
adding in its place the word ``; and''; and
0
c. By adding paragraph (e).
    The addition reads as follows:


Sec.  19.170   Termination of bonds.

* * * * *
    (e) On application by an existing proprietor who becomes exempt 
from bond requirements. If a proprietor has held a bond or bonds 
covering operations or withdrawals of distilled spirits for 
nonindustrial use and becomes exempt from those bond requirements as 
provided under Sec.  19.151(d), the proprietor may apply to TTB to 
terminate the bond or bonds covering such operations or withdrawals. To 
apply, the proprietor must file an amendment to TTB F 5110.41, 
Registration of Distilled Spirits Plant, as provided in Sec.  19.136. 
The proprietor must accurately state in the submission that the 
proprietor:
    (1) Will withdraw distilled spirits for deferred payment of tax as 
provided in Sec.  19.235;
    (2) Reasonably expects to be liable for not more than $50,000 in 
taxes with respect to distilled spirits imposed by 26 U.S.C. 5001 and 
7652 for the current calendar year (see definition of ``Reasonably 
expects'' in Sec.  19.235(e)); and
    (3) Was liable for not more than $50,000 in such taxes in the 
preceding calendar year.
* * * * *


Sec.  19.229   [Amended]

0
23. In Sec.  19.229, the third sentence of paragraph (a) is amended by 
adding

[[Page 1122]]

after the words ``unit bond'' the words ``unless the proprietor is 
exempt from furnishing such bond under Sec.  19.151(d)''.


Sec.  19.230  [Amended]

0
24. Section 19.230 is amended as follows:
0
a. Paragraph (a) is amended by adding after the words ``unit bond'' the 
words ``and the proprietor is not exempt from furnishing such bond 
under Sec.  19.151(d)''; and
0
b. In paragraph (d), a new second sentence is added.
    The addition reads as follows:


Sec.  19.230   Conditions requiring prepayment of taxes.

* * * * *
    (d) * * * This condition does not apply to a proprietor who is 
exempt from furnishing a bond under Sec.  19.151(d). * * *
* * * * *


Sec.  19.231   [Amended]

0
25. In Sec.  19.231, the first sentence is amended by removing the 
words ``When a proprietor furnishes'' and adding, in their place, the 
words ``In cases where a proprietor must furnish''.

0
26. Section 19.235 is revised to read as follows:


Sec.  19.235   Deferred payment return periods--annual, quarterly, and 
semimonthly.

    (a) Three types of return periods. The IRC provides for three 
different return periods for those taxpayers who pay their taxes on a 
deferred basis: Annual, quarterly, and semimonthly. Taxpayers who meet 
certain criteria are eligible to use annual or quarterly return periods 
and pay their taxes on an annual or quarterly basis as provided in 
paragraphs (b) and (c) of this section, respectively. Other taxpayers 
must use semimonthly return periods and pay their taxes on a 
semimonthly basis as provided in paragraph (e) of this section.
    (b) Annual return period. Subject to paragraph (d) of this section, 
a taxpayer who reasonably expects to be liable for not more than $1,000 
in taxes with respect to distilled spirits imposed by 26 U.S.C. 5001 
and 7652 for the current calendar year, and that was liable for not 
more than $1,000 in such taxes in the preceding calendar year, may 
choose to use an annual return period. However, the taxpayer may not 
use the annual return period procedure for any portion of the calendar 
year following the first date on which the aggregate amount of tax due 
from the taxpayer during the calendar year exceeds $1,000, and any tax 
which has not been paid on that date will be due on the 14th day after 
the last day of the quarterly or semimonthly period in which that date 
occurs. A taxpayer may choose to use either quarterly or semimonthly 
return periods as authorized under paragraph (c) or (e) of this 
section.
    (c) Quarterly return period. Except as provided in paragraph (b) of 
this section and subject to paragraph (d) of this section, a taxpayer 
who reasonably expects to be liable for not more than $50,000 in taxes 
with respect to distilled spirits imposed by 26 U.S.C. 5001 and 7652 
for the current calendar year, and that was liable for not more than 
$50,000 in such taxes in the preceding calendar year, may choose to use 
a quarterly return period. However, the taxpayer may not use the 
quarterly return period procedure for any portion of the calendar year 
following the first date on which the aggregate amount of tax due from 
the taxpayer during the calendar year exceeds $50,000, and any tax 
which has not been paid on that date will be due on the 14th day after 
the last day of the semimonthly period in which that date occurs.
    (d) Additional rules for annual and quarterly return periods. The 
following additional rules apply to the annual and quarterly return 
period procedures under paragraphs (b) and (c) of this section:
    (1) A taxpayer with multiple locations must combine the distilled 
spirits tax liability for all locations to determine eligibility for 
the return procedures;
    (2) A taxpayer who has both domestic operations and import 
transactions must combine the distilled spirits tax liability on the 
domestic operations and the imports to determine eligibility for the 
return procedures;
    (3) The controlled group rules of 26 U.S.C. 5061(e), which concern 
treatment of controlled groups as one taxpayer, do not apply for 
purposes of determining eligibility for the return procedures. However, 
a taxpayer who is eligible for the return procedures, and that is a 
member of a controlled group that owes $5 million or more in distilled 
spirits excise taxes per year, is required to pay taxes by electronic 
fund transfer (EFT). Quarterly payments via EFT must be transmitted in 
accordance with section 5061(e);
    (4) A new taxpayer is eligible to use the return procedures the 
first year of business simply if the taxpayer reasonably expects to be 
liable for not more than $1,000, in the case of the annual return 
procedure, or $50,000, in the case of the quarterly return procedure, 
in distilled spirits taxes during that calendar year; and
    (5) If a taxpayer becomes ineligible to use a return procedure 
described in paragraph (b) or (c) of this section because the 
taxpayer's liability exceeds $1,000 or $50,000, respectively, during a 
taxable year, that taxpayer may resume using that return procedure only 
after a full calendar year has passed during which the taxpayer's 
liability did not exceed $1,000 or $50,000 as the case may be. A 
taxpayer may not use an annual or quarterly return procedure during any 
calendar year in which the taxpayer reasonably expects to be liable for 
more than $1,000, in the case of the annual return procedure, or 
$50,000, in the case of the quarterly return procedure, in distilled 
spirits taxes.
    (e) Semimonthly return period. Except in the case of a taxpayer who 
qualifies for, and chooses to use, annual or quarterly return periods 
as provided in paragraphs (b) or (c) of this section, all other 
taxpayers must use semimonthly return periods for deferred payment of 
tax. The semimonthly return periods will run from the 1st day through 
the 15th day of each month, and from the 16th day through the last day 
of each month, except as otherwise provided in Sec.  19.237.
    (f) Definitions. For purposes of this section, the following terms 
have the meanings indicated:
    Reasonably expects. When used with reference to a taxpayer, 
reasonably expects means that there is no existing or anticipated 
circumstances known to the taxpayer (such as an increase in production 
capacity) that would cause the taxpayer's tax liability to exceed the 
prescribed limit.
    Taxpayer. A taxpayer is an individual, corporation, partnership, or 
other entity that is assigned a single Employer Identification Number 
(EIN) as defined in 26 CFR 301.7702.12.

(26 U.S.C. 5061)


0
27. Section 19.236 is amended as follows:
0
a. In paragraph (a), by removing the words ``a quarterly return as 
provided in paragraph (b)'' and adding, in their place, the words ``an 
annual or quarterly return as provided in paragraph (b) or (c)'';
0
b. In paragraph (b), by removing the citation ``Sec.  19.235(b)'' and 
adding, in its place, the citation ``Sec.  19.235(c)''; and
0
c. By adding paragraph (c).
    The addition reads as follows:


Sec.  19.236   Due dates for returns.

* * * * *
    (c) Annual returns. Where the proprietor of bonded premises has

[[Page 1123]]

withdrawn spirits from such premises on determination and before 
payment of tax, and the proprietor uses annual return periods as 
provided in Sec.  19.235(b), the proprietor must file an annual return 
covering such spirits on TTB F 5000.24, and remittance, as required by 
Sec.  19.238, Sec.  19.239, or Sec.  19.240, not later than the 14th 
day after the last day of the annual return period. If the due date 
falls on a Saturday, Sunday, or legal holiday, the return and 
remittance will be due on the immediately preceding day which is not a 
Saturday, Sunday, or legal holiday.
* * * * *


Sec.  19.263  [Amended]

0
28. In Sec.  19.263, paragraph (a)(4) is amended by removing the words 
``TTB bond'' and adding, in their place, the words ``bonded premises''.


Sec.  19.269  [Amended]

0
29. In Sec.  19.269, paragraph (a)(1) is amended by removing the word 
``TTB''.


Sec.  19.305  [Amended]

0
30. In Sec.  19.305, the second sentence is amended by removing the 
words ``bonded storage'' and adding, in their place, the words 
``storage on bonded premises''.


Sec.  19.403  [Amended]

0
31. In Sec.  19.403, the first sentence of paragraph (b) is amended by 
removing words ``TTB will'' and adding, in their place, the words 
``Except to the extent the proprietor is not required to provide a bond 
under Sec.  19.151(d), TTB will''.


Sec.  19.415  [Amended]

0
32. In Sec.  19.415, the first sentence of paragraph (c) is amended by 
removing the words ``premises bonded under this part'' and adding, in 
their place, the words ``bonded premises''.

0
33. Section 19.699 is amended as follows:
0
a. In the second sentence of paragraph (a), by removing the duplicate 
words ``fails to'' immediately after the words ``fails to'';
0
b. By revising paragraph (b); and
0
c. In paragraph (c), by revising the last two sentences.
    The revisions read as follows:


Sec.  19.699  General bond requirements.

* * * * *
    (b) Corporate surety. A company that issues bonds is called a 
``corporate surety.'' Proprietors must obtain the surety bonds required 
by this subpart from a corporate surety approved by the Secretary of 
the Treasury. The Department of the Treasury publishes a list of 
approved corporate surety companies in Treasury Department Circular 
570, Companies Holding Certificates of Authority as Acceptable Sureties 
on Federal Bonds and as Acceptable Reinsuring Companies. Treasury 
Department Circular 570 is published in the Federal Register annually 
on the first business day in July, and supplemental changes are 
published periodically thereafter. The most recent circular and any 
supplemental changes to it may be viewed on the Bureau of the Fiscal 
Service Web site at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm.
    (c) * * * A list of securities acceptable as collateral in lieu of 
surety bonds is available from the Bureau of the Fiscal Service. 
Current information and guidance from the Bureau of the Fiscal Service 
Web site may be found at https://www.fiscal.treasury.gov.
* * * * *

PART 24--WINE

0
34. The authority citation for part 24 continues to read as follows:

    Authority:  5 U.S.C. 552(a); 26 U.S.C. 5001, 5008, 5041, 5042, 
5044, 5061, 5062, 5121, 5122-5124, 5173, 5206, 5214, 5215, 5351, 
5353, 5354, 5356, 5357, 5361, 5362, 5364-5373, 5381-5388, 5391, 
5392, 5511, 5551, 5552, 5661, 5662, 5684, 6065, 6091, 6109, 6301, 
6302, 6311, 6651, 6676, 7302, 7342, 7502, 7503, 7606, 7805, 7851; 31 
U.S.C. 9301, 9303, 9304, 9306.


Sec.  24.4   [Amended]

0
35. Section 24.4 is amended by removing the words ``31 CFR Part 225--
Acceptance of Bonds, Notes, or Other Obligations Issued or Guaranteed 
by the United States as Security in Lieu of Surety or Sureties on Penal 
Bonds.'' and adding, in their place, the words ``31 CFR Part 225--
Acceptance of Bonds Secured by Government Obligations in Lieu of Bonds 
with Sureties.''.

0
36. Section 24.10 is amended as follows:
0
a. In the definition of ``Bonded wine cellar'', by adding a third 
sentence;
0
b. In the definition of ``Bonded wine premises'', by adding a second 
sentence;
0
c. In the definition of ``Bonded wine warehouse'', by adding a second 
sentence;
0
d. In the definition of ``Bonded winery'', by adding a second sentence;
0
e. By adding, in alphabetical order, a definition of ``From bond'';
0
f. In the definition of ``In bond'', by adding a new second sentence; 
and
0
g. By adding, in alphabetical order, a definition of ``To bond''.
    The additions read as follows:


Sec.  24.10  Meaning of terms.

* * * * *
    Bonded wine cellar. * * * This term includes premises described in 
the preceding sentence even if the proprietor, as authorized under the 
exemption set forth in Sec.  24.146(d), has not provided a bond for the 
premises.
    Bonded wine premises. * * * This term includes premises described 
in the preceding sentence even if the proprietor, as authorized under 
the exemption set forth in Sec.  24.146(d), has not provided a bond for 
the premises.
    Bonded wine warehouse. * * * This term includes facilities 
described in the preceding sentence even if the warehouse company or 
other person, as authorized under the exemption set forth in Sec.  
24.146(d), has not provided a bond for the facility.
    Bonded winery. * * * This term includes premises described in the 
preceding sentence even if the proprietor, as authorized under the 
exemption set forth in Sec.  24.146(d), has not provided a bond for the 
premises.
* * * * *
    From bond. When used with reference to withdrawals of wine, this 
phrase includes withdrawals from the premises established under the 
provisions of this part on which operations in untaxpaid wine are 
authorized to be conducted, even if the proprietor, as authorized under 
the exemption set forth in Sec.  24.146(d), has not provided a bond for 
the premises.
* * * * *
    In bond. * * * Wine or spirits are considered to be possessed under 
bond if they are possessed by a proprietor who is liable for the tax, 
even if the proprietor is not required to provide a bond under this 
chapter. * * *
* * * * *
    To bond. When used with reference to returns of wine, this phrase 
includes returns to premises established under the provisions of this 
part on which operations in untaxpaid wine are authorized to be 
conducted, even if the proprietor, as authorized under the exemption 
set forth in Sec.  24.146(d), has not provided a bond for the premises.
* * * * *


Sec.  24.100   [Amended]

0
37. In Sec.  24.100, the first sentence is amended by removing the 
words ``file bond'' and adding, in their place, the words ``file any 
required bond''.


Sec.  24.101  [Amended]

0
38. In Sec.  24.101, paragraph (a) is amended as follows:

[[Page 1124]]

0
a. In the first sentence, by adding the words ``any required'' before 
the word ``bond''; and
0
b. In the second sentence, by adding after the words ``the surety on 
the bond'' the words ``(if a bond is required)''.


Sec.  24.105  [Amended]

0
39. In Sec.  24.105, the fifth sentence is amended by adding after the 
words ``In any instance where a bond is required to be given'' the 
words ``under Sec.  24.146''.

0
40. Section 24.109 is amended as follows:
0
a. In paragraph (j), by removing the word ``and'';
0
b. In paragraph (k), by removing the period at the end of the text and 
adding in its place the word ``; and''; and
0
c. By adding paragraph (l).
    The addition reads as follows:


Sec.  24.109  Data for application.

* * * * *
    (l) A statement whether the applicant is required to furnish a bond 
under Sec.  24.146.
* * * * *


Sec.  24.126  [Amended]

0
41. Section 24.126 is amended by adding after the words ``sufficient 
bond coverage'' the words ``, except where Sec.  24.146(d) does not 
require bond coverage''.

0
42. Section 24.132 is added immediately after Sec.  24.131 and before 
the undesignated center heading to read as follows:


Sec.  24.132  Change in bond status.

    A proprietor must file an amended application if the proprietor's 
bond status changes in either of the following ways:
    (a) A proprietor who has not furnished any bond becomes required to 
furnish a bond as provided under Sec.  24.154(b); or
    (b) A proprietor who has furnished a bond becomes exempt from bond 
requirements under Sec.  24.146(d) and chooses to terminate all bond 
coverage as provided under Sec.  24.160.


Sec.  24.135  [Amended]

0
43. In Sec.  24.135, paragraph (b)(2) is amended by adding after the 
words ``covering the alternation'' the words ``, except in cases where 
Sec.  24.146(d) does not require a bond or bonds''.


Sec.  24.136  [Amended]

0
44. In Sec.  24.136, paragraph (c) is amended as follows:
0
a. In the first sentence, by adding after the words ``filed bond'' the 
words ``as required under Sec.  24.146''; and
0
b. In the second sentence, by removing the words ``the outgoing 
proprietor'' and adding, in their place, the words ``an outgoing 
proprietor who has filed bond as required under Sec.  24.146''.

0
45. Section 24.146 is amended as follows:
0
a. In the first sentence of paragraph (a), by removing the words ``The 
proprietor shall give bond'' and adding, in their place, ``Except as 
provided in paragraph (d) of this section, the proprietor must give 
bond'';
0
b. In paragraph (b), by revising the first sentence; and
0
c. By adding paragraph (d).
    The revision and addition read as follows:


Sec.  24.146  Bonds.

* * * * *
    (b) * * * Except as provided in paragraph (d) of this section, 
where the proprietor removes wine from bonded wine premises for 
consumption or sale, after determination and before payment of tax, the 
proprietor must, in addition to any other bond required by this part, 
furnish a tax deferral bond on TTB F 5120.36, Wine Bond, to ensure 
payment of the tax on the wine. * * *
* * * * *
    (d) Bonds covering wine for nonindustrial use and industrial use--
(1) Nonindustrial use. A proprietor who pays tax on a deferred basis 
under Sec.  24.271 is not required to provide a bond or bonds to cover 
operations and withdrawals of wine for nonindustrial use during any 
portion of a calendar year for which the proprietor is eligible to use 
an annual or quarterly return period under Sec.  24.271(b)(1)(ii) or 
(b)(1)(iii). For purposes of the preceding sentence, a proprietor is 
considered to be paying tax on a deferred basis even if the proprietor 
does not pay tax during every return period as long as the proprietor 
intends to pay tax in a future period. See Sec. Sec.  24.109 and 24.132 
for rules governing applying for this bond exemption. See Sec.  
24.154(b) for rules governing when an existing proprietor who has not 
provided a bond under this paragraph must obtain bond coverage.
    (2) Industrial use. A proprietor is required to provide a bond or 
bonds to cover operations and withdrawals of wine for industrial use 
even if the proprietor pays tax on a deferred basis under Sec.  24.271 
and is eligible to use an annual or quarterly return period under Sec.  
24.271(b)(1)(ii) or (b)(1)(iii). In the case of a proprietor whose 
operations or withdrawals involve wine for both nonindustrial and 
industrial use, wine is considered to be for industrial use for 
purposes of this paragraph unless the proprietor designates the wine as 
solely for nonindustrial use upon production of the wine by 
fermentation or upon receiving the wine and, in either case, does not 
thereafter mix the wine with any wine for industrial use.
    (3) Nonindustrial use and industrial use defined. The nonindustrial 
and industrial uses of wine are defined in subpart D of part 1 of this 
chapter. Nonindustrial uses of wine include, but are not limited to, 
uses of wine for beverage purposes. Industrial uses of wine include the 
manufacture of wine or wine products not for beverage use as set forth 
in Sec.  24.215.
* * * * *

0
46. In Sec.  24.147, a second sentence is added to read as follows:


Sec.  24.147   Operations bond or unit bond.

    * * * See Sec.  19.151(d) of this chapter for circumstances under 
which a bond is not required with respect to operations and withdrawals 
of distilled spirits.
* * * * *

0
47. Section 24.149 is amended as follows:
0
a. In paragraph (a), by removing the words ``Treasury Department 
Circular No. 570 (Companies Holding Certificates of Authority as 
Acceptable Sureties on Federal bonds and as Acceptable Reinsuring 
Companies)'' and adding, in their place, the words ``Treasury 
Department Circular 570, Companies Holding Certificates of Authority as 
Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring 
Companies''; and
0
b. By revising paragraph (b).
    The revision reads as follows:


Sec.  24.149   Corporate surety.

* * * * *
    (b) Department of the Treasury Circular 570 is published in the 
Federal Register annually on the first business day in July, and 
supplemental changes are published periodically thereafter. The most 
recent circular and any supplemental changes to it may be viewed on the 
Bureau of the Fiscal Service Web site at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm.
* * * * *

0
48. Section 24.151 is revised to read as follows:


Sec.  24.151   Deposit of collateral security.

    Bonds or notes of the United States, or other obligations which are 
unconditionally guaranteed as to both interest and principal by the 
United States, may be pledged and deposited as collateral security in 
lieu of corporate sureties in accordance with the provisions of the 
Treasury Department regulations in 31 CFR part 225,

[[Page 1125]]

Acceptance of Bonds Secured by Government Obligations in Lieu of Bonds 
with Sureties. Cash, postal money orders, certified checks, cashiers' 
checks, or treasurers' checks may also be furnished as collateral 
security in lieu of corporate sureties.

(July 30, 1947, Ch. 390, 61 Stat. 650 (6 U.S.C. 15); August 16, 
1954, Ch. 736, 68A Stat. 847, as amended (26 U.S.C. 7101))

Sec.  24.152   [Amended]

0
49. Section 24.152 is amended by removing the words ``Form 1533'' and 
adding, in their place, the words ``TTB Form 5000.18''.

0
50. Section 24.154 is revised to read as follows:


Sec.  24.154   Superseding bonds and new bonds for existing 
proprietors.

    (a) Superseding bonds. When, in the opinion of the appropriate TTB 
officer, the interests of the Government demand it, or in any case 
where the validity of the bond becomes impaired in whole or in part for 
any reason, the principal must give a new bond that supersedes the 
existing bond. A superseding bond will be required immediately in the 
case of the insolvency of a corporate surety. Executors, 
administrators, assignees, receivers, trustees, or other persons acting 
in a fiduciary capacity, to continue or to liquidate the business of 
the principal, must execute and file a superseding bond or obtain the 
consent of the surety or sureties on the existing bond or bonds. When 
under the provisions of Sec.  24.157 the surety has filed an 
application to be relieved of liability under any bond given under this 
part and the principal desires or intends to continue business or 
operations to which the bond relates, the principal must file a valid 
superseding bond to be effective on or before the date specified in the 
surety's notice. Superseding bonds will show the current date of 
execution and the effective date.
    (b) New bonds for existing proprietors--(1) General. Subject to 
paragraph (b)(2) of this section, if an existing proprietor has not 
furnished a bond or bonds covering operations and withdrawals of wine 
for nonindustrial use because the proprietor was exempt from bond 
requirements under Sec.  24.146(d), the proprietor must furnish a bond 
or bonds as provided in this subpart beginning in any portion of a 
calendar year following the first date on which the aggregate amount of 
tax due from the proprietor during the calendar year exceeds $50,000. 
When furnishing the bond or bonds, the proprietor must also file an 
amended application as provided in Sec.  24.132 to change the 
proprietor's bond status.
    (2) Grace period for wine bonds under Sec.  24.146(a). An existing 
proprietor who must furnish a wine bond under Sec.  24.146(a) as 
provided in paragraph (b)(1) of this section will be treated as having 
furnished the required bond if the proprietor submits the bond on TTB F 
5120.36 no later than 30 days following the first date on which the 
aggregate amount of tax due from the proprietor during the relevant 
calendar year exceeds $50,000. The proprietor will be treated as having 
furnished the required wine bond for purposes of this paragraph until 
TTB approves or disapproves the bond. Until TTB takes action on a bond 
submission, a proprietor who complies with the requirements of this 
paragraph may remove wine on which the tax has been determined, but not 
paid, to the extent that the proprietor's liability for tax on those 
removals does not exceed $1,000.
    (3) Tax deferral bonds under Sec.  24.146(b). The grace period 
specified in paragraph (b)(2) of this section does not apply to tax 
deferral bonds under Sec.  24.146(b). Except to the extent authorized 
under paragraph (b)(2) of this section, a proprietor who must furnish a 
tax deferral bond under paragraph (b)(1) of this section may not 
withdraw wine from the bonded premises on which the tax has been 
determined, but not paid, until TTB approves the tax deferral bond.
    (Sec. 201, Pub. L. 85-859, 72 Stat. 1379, as amended, 1380, as 
amended, 1394, as amended (26 U.S.C. 5354, 5362, 5551))
    (Approved by the Office of Management and Budget under control 
number 1513-0009)


Sec.  24.156   [Amended]

0
51. Section 24.156 is amended by adding after the words ``as provided 
in Sec.  24.140(b);'' the words ``pursuant to an application by an 
existing proprietor who becomes exempt from bond requirements as 
provided in Sec.  24.160;''.

0
52. Section 24.160 is added to subpart D to read as follows:


Sec.  24.160   Application to terminate bond by existing proprietor who 
becomes exempt from bond requirements.

    If a proprietor has held a bond or bonds covering operations or 
withdrawals of wine for nonindustrial use and becomes exempt from those 
bond requirements as provided under Sec.  24.146(d), the proprietor may 
apply to TTB to terminate the bond or bonds covering such operations or 
withdrawals. To apply, the proprietor must file an amended application 
as provided in Sec.  24.132. The proprietor must accurately state in 
the submission that the proprietor:
    (a) Will withdraw wine for deferred payment of tax under Sec.  
24.271;
    (b) Reasonably expects to be liable for not more than $50,000 in 
taxes with respect to wine imposed by 26 U.S.C. 5041 and 7652 for the 
current calendar year (see definition of ``Reasonably expects'' in 
Sec.  24.271(b)(1)(iv)(B)); and
    (c) Was liable for not more than $50,000 in such taxes in the 
preceding calendar year.

0
53. In Sec.  24.271, the section heading and paragraphs (a) and (b) are 
revised to read as follows:


Sec.  24.271   Deferred payment return periods--annual, quarterly, and 
semimonthly.

    (a) General. This section governs payment of tax on a deferred 
basis. The tax on wine is paid by an Excise Tax Return, TTB F 5000.24, 
which is filled with a remittance (check, cash, or money order) of the 
full amount of tax due. Prepayments of tax on wine during the period 
covered by the return are shown separately on the Excise Tax Return 
form. If no tax is due for the return period, the filing of a return is 
not required.
    (b) Return periods and due dates--(1) Return periods. (i) 
Semimonthly return period. Except in the case of a taxpayer who 
qualifies for, and chooses to use, an annual or quarterly return period 
as provided in paragraph (b)(1)(ii) or (b)(1)(iii) of this section, all 
taxpayers who defer payment of taxes must use semimonthly return 
periods. The semimonthly return periods run from the 1st day through 
the 15th day of each month, and from the 16th day through the last day 
of each month, except as otherwise provided in paragraph (c) of this 
section.
    (ii) Annual return period. Subject to paragraph (b)(1)(iv) of this 
section, a taxpayer may choose to use an annual return period if the 
taxpayer was not liable for more than $1,000 in taxes with respect to 
wine imposed by 26 U.S.C. 5041 and 7652 in the preceding calendar year 
and if that taxpayer reasonably expects to be liable for not more than 
$1,000 in such taxes during the current calendar year. Except as 
provided in paragraph (b)(2), the last day for paying the tax and 
filing the return will be the 14th day after the last day of the 
calendar year. However, the taxpayer may not use the annual return 
period procedure for any portion of the calendar year following the 
first date on which the aggregate amount of tax due from the taxpayer 
during the calendar year exceeds $1,000, and any tax that

[[Page 1126]]

has not been paid on that date will be due on the 14th day after the 
last day of the quarterly or semimonthly period in which that date 
occurs.
    (iii) Quarterly return period. Except as provided in paragraph 
(b)(1)(ii) of this section and subject to paragraph (b)(1)(iv) of this 
section, a taxpayer may choose to use a quarterly return period if the 
taxpayer was not liable for more than $50,000 in taxes with respect to 
wine imposed by 26 U.S.C. 5041 and 7652 in the preceding calendar year 
and if that taxpayer reasonably expects to be liable for not more than 
$50,000 in such taxes during the current calendar year. In such a case 
the last day for paying the tax and filing the return will be the 14th 
day after the last day of the calendar quarter. However, the taxpayer 
may not use the quarterly return period procedure for any portion of 
the calendar year following the first date on which the aggregate 
amount of tax due from the taxpayer during the calendar year exceeds 
$50,000, and any tax that has not been paid on that date will be due on 
the 14th day after the last day of the semimonthly period in which that 
date occurs.
    (iv) Additional rules for annual and quarterly return periods. The 
following additional rules apply to the annual and quarterly return 
period procedures under this section:
    (A) A ``taxpayer'' is an individual, corporation, partnership, or 
other entity that is assigned a single Employer Identification Number 
as defined in 26 CFR 301.7701-12;
    (B) ``Reasonably expects'' means that there is no existing or 
anticipated circumstance known to the taxpayer (such as an increase in 
production capacity) that would cause the taxpayer's tax liability to 
exceed the prescribed limit;
    (C) A taxpayer with multiple locations must combine the wine tax 
liability for all locations to determine eligibility for the return 
procedures;
    (D) A taxpayer who has both domestic operations and import 
transactions must combine the wine tax liability on the domestic 
operations and the imports to determine eligibility for the return 
procedures;
    (E) The controlled group rules of 26 U.S.C. 5061(e), which concern 
treatment of controlled groups as one taxpayer, do not apply for 
purposes of determining eligibility for the return procedures. However, 
a taxpayer who is eligible for the return procedures, and who is a 
member of a controlled group that owes $5 million or more in wine 
excise taxes per year, is required to pay taxes by electronic fund 
transfer (EFT). Payments via EFT must be transmitted in accordance with 
section 5061(e);
    (F) A new taxpayer is eligible to use the return procedures the 
first year of business simply if the taxpayer reasonably expects to be 
liable for not more than $1,000 (in the case of the annual return 
procedure) or $50,000 (in the case of the quarterly return procedure) 
in wine taxes during that calendar year; and
    (G) If a taxpayer becomes ineligible to use a return procedure 
described in paragraph (b)(1)(ii) or (iii) of this section because the 
taxpayer's liability exceeds $1,000 or $50,000, respectively, in tax 
liability during a taxable year, that taxpayer may resume using that 
return procedure only after a full calendar year has passed during 
which the taxpayer's liability did not exceed $1,000 or $50,000 as the 
case may be. A taxpayer may not use an annual or quarterly return 
procedure during any calendar year in which the taxpayer reasonably 
expects to be liable for more than $1,000, in the case of the annual 
return procedure, or $50,000, in the case of the quarterly return 
procedure, in wine taxes.
    (2) Semimonthly, quarterly, and annual tax return due dates. (i) 
General. Except as provided in paragraph (b)(2)(ii), the taxpayer must 
file the semimonthly, quarterly, or annual return, with remittance, for 
each return period not later than the 14th day after the last day of 
the return period. If the due date falls on a Saturday, Sunday, or 
legal holiday, the return and remittance are due on the immediately 
preceding day that is not a Saturday, Sunday, or legal holiday, except 
as otherwise provided in paragraph (c)(3) of this section.
    (ii) Due dates for 2016 annual returns. In the case of a taxpayer 
filing an annual return covering the 2016 calendar year, the taxpayer 
must file the return, with remittance, not later than January 30, 2017.
* * * * *


Sec.  24.273   [Removed and Reserved]

0
54. Section 24.273 is removed and reserved.

0
55. In Sec.  24.275, paragraph (a) is revised to read as follows:


Sec.  24.275   Prepayment of tax.

    (a) General--(1) Circumstances where prepayment required. The 
proprietor must, before removal of wine for consumption or sale, file 
Excise Tax Return, TTB F 5000.24, with remittance, where:
    (i) The proprietor is required to prepay tax under Sec.  24.276; or
    (ii) The proprietor is required to obtain a tax deferral bond, the 
bond is not in the maximum penal sum, and the tax determined and unpaid 
at any one time exceeds the coverage of the wine bond.
    (2) Forwarding the return with remittance. The proprietor must 
forward the return with remittance pursuant to the instructions printed 
on the return. For the purpose of complying with this section, the term 
``forwarding'' means the deposit in the United States mail properly 
addressed to TTB.
* * * * *

0
56. In Sec.  24.283, the second sentence is revised to read as follows;


Sec.  24.283  Reconsignment.

    * * * The proprietor to whom the wine is reconsigned will be liable 
for the tax on the wine while it is in transit after reconsignment. * * 
*
* * * * *


Sec.  24.300  [Amended]

0
57. Section 24.300 is amended as follows:
0
a. In paragraph (g)(2)(ii), by removing the citation ``Sec.  24.271'' 
and adding, in its place, the citation ``Sec.  24.271(b)(1)(iii)''; and
0
b. In paragraph (g)(2)(iii), by removing the citation ``Sec.  24.273'' 
and adding, in its place, the citation ``Sec.  24.271(b)(1)(ii)''.


Sec.  24.323  [Amended]

0
58. In Sec.  24.323, the first sentence is amended by removing the 
words ``, unless exempted under the provisions of Sec.  24.273''.

PART 25--BEER

0
59. The authority citation for part 25 continues to read as follows:

    Authority: 19 U.S.C. 81c; 26 U.S.C. 5002, 5051-5054, 5056, 5061, 
5121, 5122-5124, 5222, 5401-5403, 5411-5417, 5551, 5552, 5555, 5556, 
5671, 5673, 5684, 6011, 6061, 6065, 6091, 6109, 6151, 6301, 6302, 
6311, 6313, 6402, 6651, 6656, 6676, 6806, 7342, 7606, 7805; 31 
U.S.C. 9301, 9303-9308.


Sec.  25.4  [Amended]

0
60. In Sec.  25.4, the list of related regulations is amended by 
removing the entry ``31 CFR Part 225--Acceptance of Bonds, Notes, or 
Other Obligations Issued or Guaranteed by the United States as Security 
in Lieu of Surety or Sureties on Penal Bonds'' and adding, in its 
place, the entry ``31 CFR Part 225--Acceptance of Bonds Secured by 
Government Obligations in Lieu of Bonds with Sureties''.

0
61. Section 25.11 is amended by adding, in alphabetical order, 
definitions of ``Bonded premises of a

[[Page 1127]]

distilled spirits plant'', ``Bonded wine premises'', and ``Bonded 
winery'' to read as follows:


Sec.  25.11  Meaning of terms.

* * * * *
    Bonded premises of a distilled spirits plant. The bonded premises 
of a distilled spirits plant as described in part 19 of this chapter. 
This term includes premises described in the preceding sentence even if 
the distilled spirits plant proprietor, as authorized under the 
exemption set forth in Sec.  19.151(d) of this chapter, has not 
provided a bond for the premises.
    Bonded wine premises. Bonded wine premises established under part 
24 of this chapter. This term includes premises described in the 
preceding sentence even if the proprietor, as authorized under the 
exemption set forth in Sec.  24.146(d) of this chapter, has not 
provided a bond for the premises.
    Bonded winery. The premises of a bonded winery as described in part 
24 of this chapter. This term includes premises described in the 
preceding sentence even if the proprietor, as authorized under Sec.  
24.146(d) of this chapter, has not provided a bond for the premises.
* * * * *

0
62. Section 25.62 is amended by adding paragraph (a)(13) to read as 
follows:


Sec.  25.62  Data for notice.

    (a) * * *
    (13) A statement whether the brewer is required to furnish a bond 
under Sec.  25.91.
* * * * *

0
63. Section 25.72 is amended as follows:
0
a. In the third sentence of paragraph (a), by adding after the words 
``own name'' the words ``, except that the successor brewer is not 
required to file a bond if the brewer is exempt from bond requirements 
under Sec.  25.91(e)''; and
0
b. In paragraph (b)(1), by adding a second sentence.
    The addition reads as follows:


Sec.  25.72  Change in proprietorship.

* * * * *
    (b) * * *
    (1) * * * A fiduciary is not required to furnish a consent of 
surety under this paragraph if the brewer is exempt from bond 
requirements under Sec.  25.91(e).
* * * * *

0
64. Section 25.73 is amended as follows:
0
a. In paragraph (b)(3), by removing the words ``A consent'' and adding, 
in their place, the words ``If the brewer has filed a bond, a 
consent''; and
0
b. By revising paragraph (c).
    The revision reads as follows:


Sec.  25.73  Change in partnership.

* * * * *
    (c) Settlement of partnership. If the surviving partner(s) acquires 
the business on completion of the settlement of the partnership, that 
partner(s) must qualify in his or her own name from the date of 
acquisition. The partner(s) must give a new brewer's notice on Form 
5130.10 and a new bond on Form 5130.22, except that the partner(s) is 
not required to file a bond if the brewer is exempt from bond 
requirements under Sec.  25.91(e).
* * * * *

0
65. Section 25.77 is amended as follows:
0
a. In the first sentence, by removing the words ``Form 1533 (5000.18) 
in accordance with'' and adding, in their place, the words ``Form 
5000.18, as required under''; and
0
b. By adding a new second sentence.
    The addition reads as follows:


Sec.  25.77  Change in location.

    * * * The brewer is not required to file a new bond or consent of 
surety if the brewer is exempt from bond requirements under Sec.  
25.91(e). * * *
* * * * *

0
66. Section 25.79 is added immediately after Sec.  25.78 and before the 
undesignated center heading to read as follows:


Sec.  25.79  Change in bond status.

    A brewer must file an amended Brewer's Notice, Form 5130.10, if the 
brewer's bond status changes because either:
    (a) A brewer has not furnished any bond and has become required to 
furnish a bond as provided under Sec.  25.95(b); or
    (b) A brewer has furnished a bond, has become exempt from bond 
requirements under Sec.  25.91(e), and chooses to terminate all bond 
coverage as provided under Sec.  25.106.


Sec.  25.81  [Amended]

0
67. In Sec.  25.81, paragraph (b)(3) is amended by adding after the 
words ``alternation of premises'' the words ``, except to the extent no 
bond is required under Sec.  24.146 of this chapter or Sec.  
25.91(e)''.

0
68. Section 25.91 is amended as follows:
0
a. In the first sentence of paragraph (a), by removing the words 
``Every person'' and adding, in their place, ``Except as provided in 
paragraph (e) of this section, every person''; and
0
b. By adding paragraph (e).
    The addition reads as follows:


Sec.  25.91  Requirement for bond.

* * * * *
    (e) Bond exemption. A brewer who pays tax on a deferred basis under 
Sec.  25.164 is not required to provide a bond to cover operations and 
withdrawals of beer during any portion of a calendar year for which the 
brewer is eligible to use an annual or quarterly return period under 
Sec.  25.164(c)(2) or (c)(3). A brewer is considered to be paying tax 
on a deferred basis for purposes of the preceding sentence even if the 
brewer does not pay tax during every return period as long as the 
brewer intends to pay tax in a future period. See Sec. Sec.  25.62 and 
25.79 for rules governing applying for this bond exemption. See Sec.  
25.95 for rules governing when an existing brewer who has not provided 
a bond under this paragraph must obtain bond coverage.
* * * * *


Sec.  25.92  [Amended]

0
69. Section 25.92 is amended by removing the words ``Form 1533 
(5000.18)'' and adding, in their place, the words ``Form 5000.18''.

0
70. In Sec.  25.93, paragraph (a) is revised to read as follows:


Sec.  25.93  Penal sum of bond.

    (a) General. Except as provided in paragraph (a)(3) of this 
section, a brewer must furnish a bond of a penal sum as prescribed in 
this section.
    (1) Brewers who pay taxes using semimonthly periods. In the case of 
a brewer who pays taxes using semimonthly return periods under Sec.  
25.164(c)(1), the penal sum of the brewers bond must be equal to 10 
percent of the maximum amount of tax calculated at the rates prescribed 
by law which the brewer will become liable to pay during a calendar 
year during the period of the bond on beer:
    (i) Removed for transfer to the brewery from other breweries owned 
by the same brewer;
    (ii) Removed without payment of tax for export or for use as 
supplies on vessels and aircraft;
    (iii) Removed without payment of tax for use in research, 
development, or testing; and
    (iv) Removed for consumption or sale.
    (2) Brewers who pay taxes using quarterly or annual return periods. 
In the case of a brewer who pays taxes using annual or quarterly return 
periods under Sec.  25.164(c)(2) or (c)(3), the penal sum of the 
brewers bond is $1,000 and covers the beer described in paragraph 
(a)(1)(i)-(iv) of this section.

[[Page 1128]]

    (3) Brewers who are exempt from bond requirements. This section 
does not apply to a brewer who is exempt from bond requirements under 
Sec.  25.91(e).
* * * * *

0
71. Section 25.95 is revised to read as follows:


Sec.  25.95  Superseding bonds and new bonds for existing brewers.

    (a) Superseding bonds. The appropriate TTB officer may at any time, 
at his or her discretion, require a new bond that supersedes the 
existing bond. A superseding bond is required immediately in the case 
of insolvency of a surety. Executors, administrators, assignees, 
receivers, trustees, or other persons acting in a fiduciary capacity 
must execute a superseding bond or obtain a consent of surety on all 
bonds in effect. When the interests of the Government so demand, or in 
any case when the security of the bond becomes impaired for any reason, 
the principal will be required to give a superseding bond. When a bond 
is found to be not acceptable by the appropriate TTB officer, the 
principal will be required immediately to obtain a satisfactory 
superseding bond or discontinue business.
    (b) New bonds for existing brewers--(1) General. Subject to 
paragraph (b)(2) of this section, if an existing brewer has not 
furnished a bond covering operations and withdrawals of beer because 
the brewer was exempt from bond requirements under Sec.  25.91(e), the 
brewer must furnish a bond as provided in this subpart beginning in any 
portion of a calendar year following the first date on which the 
aggregate amount of tax due from the brewer during the calendar year 
exceeds $50,000. When furnishing the bond, the brewer must also file an 
amended Brewer's Notice, Form 5130.10, as provided in Sec.  25.79 to 
change the brewer's bond status.
    (2) Grace period for new bonds for existing brewers--(i) Bonds 
covering operations. Except as provided in paragraph (b)(2)(ii) of this 
section, an existing brewer who must furnish a bond as provided in 
paragraph (b)(1) of this section will be treated as having furnished 
the required bond if the brewer submits the bond on Form 5130.22 no 
later than 30 days following the first date on which the aggregate 
amount of tax due from the brewer during the relevant calendar year 
exceeds $50,000. Except as provided in paragraph (b)(2)(ii) of this 
section, the brewer will be treated as having furnished the required 
bond for the purposes of this paragraph until TTB approves or 
disapproves the bond.
    (ii) Bonds covering tax-deferred removals. The grace period 
specified in paragraph (b)(2)(i) of this section does not apply to beer 
removed for consumption or sale on deferred payment of tax. A brewer 
that must furnish a bond under paragraph (b)(1) of this section may not 
remove beer for consumption or sale on deferred payment of tax until 
TTB approves the bond.

(Sec. 201, Pub. L. 85-859, 72 Stat. 1388, as amended (26 U.S.C. 
5401))



0
72. Section 25.98 is amended as follows:
0
a. In paragraph (b), by removing the words ``Circular No. 570, 
Companies Holding Certificates of Authority as Acceptable Reinsuring 
Companies'' and adding, in their place, the words ``Circular 570, 
Companies Holding Certificates of Authority as Acceptable Sureties on 
Federal Bonds and as Acceptable Reinsuring Companies'';
0
b. By revising paragraph (c);
0
c. In paragraph (e), by removing the citation ``Part 225'' and adding, 
in its place, the citation ``part 225''; and
0
d. By adding paragraph (f).
    The revision and addition read as follows:


Sec.  25.98  Surety or security.

* * * * *
    (c) Availability of Circular 570. Department of the Treasury 
Circular 570 is published in the Federal Register annually on the first 
business day in July, and supplemental changes are published 
periodically thereafter. The most recent circular and any supplemental 
changes to it may be viewed on the Bureau of the Fiscal Service Web 
site at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm.
* * * * *
    (f) Bond guaranteed by deposit of cash or cash equivalent. As an 
alternative to the corporate surety bond under paragraph (b) of this 
section, a person can file a bond that guarantees payment of the 
liability by submitting cash or its equivalent (including a money 
order, cashier's check, or personal check). Cash or its equivalent must 
be no less than the penal sums of the required bonds. Bonds described 
in this paragraph will be released if there are no outstanding 
liabilities when the bond is terminated. Cash equivalents must be 
payable to the Alcohol and Tobacco Tax and Trade Bureau.
* * * * *

0
73. Section 25.102 is revised to read as follows:


Sec.  25.102  Termination of surety's liability.

    The liability of a surety on a bond required by this part will be 
terminated only as to liability arising on or after:
    (a) The effective date of a superseding bond;
    (b) The date of approval of the discontinuance of business of the 
brewer;
    (c) Following the giving of notice by the surety; or
    (d) In the case of a brewer who applies to terminate a surety bond 
under Sec.  25.106, the date that TTB approves the brewer's application 
under that section.

(Sec. 201, Pub. L. 85-859, 72 Stat. 1388, as amended (26 U.S.C. 
5401))



0
74. Section 25.104 is revised to read as follows:


Sec.  25.104  Termination of bonds.

    (a) General. Brewer's bonds may be terminated as to liability for 
future removals or receipts under the following circumstances:
    (1) Pursuant to application of the surety as provided in Sec.  
25.103;
    (2) On approval of a superseding bond as provided in Sec.  25.95;
    (3) When a brewer discontinues business as provided in Sec.  25.85; 
or
    (4) When an existing brewer who becomes exempt from bond 
requirements terminates the bond as provided in Sec.  25.106.
    (b) Notification. On termination of the surety's liability under a 
bond, the appropriate TTB officer will notify the principal and 
sureties.

(31 U.S.C. 9301, 9303)


Sec.  25.105  [Amended]

0
75. In Sec.  25.105, the first sentence is amended by removing the 
citation ``31 CFR Part 225'' and adding, in their place, the citation 
``31 CFR part 225''.

0
76. Section 25.106 is added to subpart H to read as follows:


Sec.  25.106  Application to terminate bond by existing brewer who 
becomes exempt from bond requirements.

    If a brewer has held a bond and becomes exempt from bond 
requirements under Sec.  24.91(e), the brewer may apply to TTB to 
terminate the bond. To apply, the brewer must file an amendment to the 
Brewer's Notice, Form 5130.10, as provided in Sec.  25.79. The brewer 
must accurately state in the submission to TTB that the brewer:
    (a) Will withdraw beer for deferred payment of tax under Sec.  
25.164;
    (b) Reasonably expects to be liable for not more than $50,000 in 
taxes with respect to beer imposed by 26 U.S.C. 5051 and 7652 for the 
current calendar year (see definition of ``Reasonably expects'' in 
Sec.  25.164(c)(4)(ii)); and

[[Page 1129]]

    (c) Was liable for not more than $50,000 in such taxes in the 
preceding calendar year.

0
77. Section 25.164 is revised to read as follows:


Sec.  25.164  Deferred payment return periods--annual, quarterly, and 
semimonthly.

    (a) Requirement for filing. This section governs payment of tax on 
a deferred basis. Each brewer must pay the tax on beer (unless prepaid) 
by return on Form 5000.24. The brewer must file Form 5000.24 as a 
return regardless of whether tax has been prepaid as provided in Sec.  
25.175 during the return period. The brewer must file a return on Form 
5000.24 for each return period even though no beer was removed for 
consumption or sale.
    (b) Payment of tax. The brewer must include for payment with the 
return the full amount of tax required to be determined (and which has 
not been prepaid) on all beer removed for consumption or sale during 
the period covered by the return.
    (c) Return periods--(1) Semimonthly return period. Except in the 
case of a taxpayer who qualifies for annual or quarterly return periods 
as provided in paragraphs (c)(2) or (c)(3) of this section, all 
taxpayers must use semimonthly return periods for deferred payment of 
tax. The semimonthly return periods run from the brewer's business day 
beginning on the first day of each month through the brewer's business 
day beginning on the 15th day of that month, and from the brewer's 
business day beginning on the 16th day of the month through the 
brewer's business day beginning on the last day of the month, except as 
otherwise provided in Sec.  25.164a.
    (2) Annual return period. Subject to paragraph (b)(4) of this 
section, a taxpayer who reasonably expects to be liable for not more 
than $1,000 in taxes with respect to beer imposed by 26 U.S.C. 5051 and 
7652 in the current calendar year, and that was liable for not more 
than $1,000 in such taxes in the preceding calendar year, may choose to 
use an annual return period. However, the taxpayer may not use the 
annual return period procedure for any portion of the calendar year 
following the first date on which the aggregate amount of tax due from 
the taxpayer during the calendar year exceeds $1,000, and any tax which 
has not been paid on that date will be due on the 14th day after the 
last day of the quarterly or semimonthly period in which that date 
occurs.
    (3) Quarterly return period. A taxpayer may choose to use a 
quarterly return period if the taxpayer was not liable for more than 
$50,000 in taxes with respect to beer imposed by 26 U.S.C. 5051 and 
7652 in the preceding calendar year and if that taxpayer reasonably 
expects to be liable for not more than $50,000 in such taxes during the 
current calendar year. In such a case the last day for paying the tax 
and filing the return will be the 14th day after the last day of the 
calendar quarter. However, the taxpayer may not use the quarterly 
return period procedure for any portion of the calendar year following 
the first date on which the aggregate amount of tax due from the 
taxpayer during the calendar year exceeds $50,000, and any tax that has 
not been paid on that date will be due on the 14th day after the last 
day of the semimonthly period in which that date occurs.
    (4) Additional rules for annual and quarterly return periods. The 
following additional rules apply to the annual and quarterly return 
period procedure under this section:
    (i) A ``taxpayer'' is an individual, corporation, partnership, or 
other entity that is assigned a single Employer Identification Number 
as defined in 26 CFR 301.7701-12;
    (ii) ``Reasonably expects'' means that there is no existing or 
anticipated circumstance known to the taxpayer (such as an increase in 
production capacity) that would cause the taxpayer's tax liability to 
exceed the prescribed limit;
    (iii) A taxpayer with multiple locations must combine the beer tax 
liability for all locations to determine eligibility for the return 
procedures;
    (iv) A taxpayer who has both domestic operations and import 
transactions must combine the beer tax liability on the domestic 
operations and the imports to determine eligibility for the return 
procedures;
    (v) The controlled group rules of 26 U.S.C. 5061(e), which concern 
treatment of controlled groups as one taxpayer, do not apply for 
purposes of determining eligibility for the return procedures. However, 
a taxpayer who is eligible for the return procedures, and who is a 
member of a controlled group that owes $5 million or more in beer 
excise taxes per year, is required to pay taxes by electronic fund 
transfer (EFT). Payments via EFT must be transmitted in accordance with 
section 5061(e);
    (vi) A new taxpayer is eligible to use the return procedures in the 
first year of business simply if the taxpayer reasonably expects to be 
liable for not more than $1,000 (in the case of the annual return 
procedure) or $50,000 (in the case of the quarterly return procedure) 
in beer taxes during that calendar year; and
    (vii) If a taxpayer becomes ineligible to use a return procedure 
prescribed in paragraph (c)(2) or (c)(3) of this section because the 
taxpayer's liability exceeds $1,000 or $50,000, respectively, during a 
taxable year, that taxpayer may resume using that return procedure only 
after a full calendar year has passed during which the taxpayer's 
liability did not exceed $1,000 or $50,000, as the case may be. A 
taxpayer may not use an annual or quarterly return procedure during any 
calendar year in which the taxpayer reasonably expects to be liable for 
more than $1,000, in the case of the annual return procedure, or 
$50,000, in the case of the quarterly return procedure, in beer taxes.
    (d) Time for filing returns and paying tax. Except as otherwise 
provided in Sec.  25.164a for semimonthly tax returns, the brewer must 
file the tax return, TTB F 5000.24, for each return period, and make 
remittance as required by this section, not later than the 14th day 
after the last day of the return period. If the due date falls on a 
Saturday, Sunday, or legal holiday, the return and remittance are due 
on the immediately preceding day that is not a Saturday, Sunday, or 
legal holiday, except as otherwise provided in Sec.  25.164a(c).
    (e) Timely filing. (1) When the brewer sends the semimonthly, 
quarterly, or annual tax return, Form 5000.24, by U.S. mail, in 
accordance with the instructions on the form, as required by this 
section, with remittance as provided for in this section, or without 
remittance as provided for in Sec.  25.165, the date of the official 
postmark of the United States Postal Service stamped on the cover in 
which the return and remittance were mailed is considered the date of 
delivery of the return and the date of delivery of the remittance, if 
enclosed with the return. When the postmark on the cover is illegible, 
the burden is on the brewer to prove when the postmark was made.
    (2) When the brewer sends the semimonthly, quarterly, or annual 
return with or without remittance by registered mail or by certified 
mail, the date of registry or the date of the postmark on the sender's 
receipt of certified mail will be treated as the date of delivery of 
the return and of the remittance, if enclosed with the return.

(Approved by the Office of Management and Budget under control 
number 1513-0083)

(Aug. 16, 1954, ch. 736, 68A Stat. 775, as amended (26 U.S.C. 6302); 
sec. 201, Pub. L. 85-859, 72 Stat. 1335, as amended (26 U.S.C. 
5061))


[[Page 1130]]




Sec.  25.174  [Amended]

0
78. In Sec.  25.174, the first sentence of paragraph (a) is amended by 
adding after the word ``When'' the words ``a brewer has filed a bond 
and''.

0
79. In Sec.  25.184, paragraph (a) is revised to read as follows:


Sec.  25.184  Losses in transit.

    (a) Liability for losses. The brewery to which beer is transferred 
is liable for the tax on beer lost in transit. If beer is reconsigned 
while in transit or returned to the shipping brewery, the brewery to 
which the beer is reconsigned or returned is liable for the tax on beer 
lost in transit.
* * * * *

0
80. Section 25.274 is amended as follows:
0
a. In the first sentence of paragraph (a), by removing the words ``Any 
person'' and adding, in their place, ``Except as provided in paragraph 
(d) of this section, any person''; and
0
b. By adding paragraph (d).
    The addition reads as follows:


Sec.  25.274  Bond.

* * * * *
    (d) Bond exemption. A person is not required to provide a bond 
under this section if the person is a brewer qualified under this part 
and if, under Sec.  25.91(e), the person is exempt from bond 
requirements applicable to brewers.
* * * * *


Sec.  25.276  [Amended]

0
81. In Sec.  25.276, paragraph (a) is amended by adding the words ``any 
required'' before the word ``bond''.

PART 26--LIQUORS AND ARTICLES FROM PUERTO RICO AND THE VIRGIN 
ISLANDS

0
82. The authority citation for part 26 is revised to read as follows:

    Authority: 19 U.S.C. 81c; 26 U.S.C. 5001, 5007, 5008, 5010, 
5041, 5051, 5061, 5111-5114, 5121, 5122-5124, 5131-5132, 5207, 5232, 
5271, 5275, 5301, 5314, 5555, 6001, 6109, 6301, 6302, 6804, 7101, 
7102, 7651, 7652, 7805; 27 U.S.C. 203, 205; 31 U.S.C. 9301, 9303, 
9304, 9306.


0
83. Section 26.11 is amended by adding, in alphabetical order, the 
definition of ``Bonded premises of a distilled spirits plant'' to read 
as follows:


Sec.  26.11  Meaning of terms.

* * * * *
    Bonded premises of a distilled spirits plant. The bonded premises 
of a distilled spirits plant as described in part 19 of this chapter. 
This term includes premises described in the preceding sentence even if 
the distilled spirits plant proprietor, as authorized under the 
exemption set forth in Sec.  19.151(d) of this chapter, has not 
provided a bond for the premises.
* * * * *

0
84. Section 26.62 is amended as follows:
0
a. In paragraph (a), by removing the words ``Circular No. 570'' and 
adding, in their place, the words ``Circular 570''; and
0
b. By revising paragraph (b).
    The revision reads as follows:


Sec.  26.62  Corporate surety.

* * * * *
    (b) Department of the Treasury Circular 570 is published in the 
Federal Register annually on the first business day in July, and 
supplemental changes are published periodically thereafter. The most 
recent circular and any supplemental changes to it may be viewed on the 
Bureau of the Fiscal Service Web site at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm.
* * * * *

0
85. Section 26.63 is amended as follows:
0
a. By revising the section heading;
0
b. By redesignating the existing text as paragraph (a) and adding a 
paragraph heading;
0
c. In redesignated paragraph (a), by removing the words ``Acceptance of 
Bonds, Notes or Other Obligations Issued or Guaranteed by the United 
States as Security in Lieu of Surety or Sureties on Penal Bonds'' and 
adding, in their place, the words ``Acceptance of Bonds Secured by 
Government Obligations in Lieu of Bonds with Sureties''; and
0
d. By adding paragraph (b).
    The revision and additions read as follows:


Sec.  26.63  Deposit of securities or cash (including cash equivalents) 
in lieu of corporate surety.

    (a) Deposit of securities. * * *
    (b) Deposit of cash or cash equivalent. In lieu of corporate 
surety, a person can file a bond that guarantees payment of the 
liability by submitting cash or its equivalent (including a money 
order, cashier's check, or personal check). Cash or its equivalent must 
be no less than the penal sums of the required bonds. Cash equivalents 
must be payable to the Alcohol and Tobacco Tax and Trade Bureau.
* * * * *


Sec.  26.64  [Amended]

0
86. Section 26.64 is amended by removing the words ``Form 1533'' and 
adding, in their place, the words ``TTB Form 5000.18''.

0
87. Section 26.66 is amended as follows:
0
a. By revising paragraph (a); and
0
b. By adding paragraph (c).
    The revision and addition read as follows:


Sec.  26.66   Bond, TTB Form 5110.50--Distilled spirits.

    (a) General. Except as provided in paragraph (c) of this section, 
if any person intends to ship to the United States, distilled spirits 
products of Puerto Rican manufacture from bonded storage in Puerto Rico 
on computation, but before payment, of the tax imposed by 26 U.S.C. 
7652(a), equal to the tax imposed in the United States by 26 U.S.C. 
5001(a)(1), the person must, before making any such shipment, furnish a 
bond. The person must furnish a bond on TTB Form 5110.50 for each 
premises from which shipment will be made, to secure payment of such 
tax, at the time and in the manner prescribed in this subpart, on all 
distilled spirits products shipped. The bond must be executed in a 
penal sum not less than the amount of unpaid tax which, at any one 
time, is chargeable against the bond. The penal sum of such bond must 
not exceed $1,000,000, but in no case will the penal sum be less than 
$1,000.
* * * * *
    (c) Bonds covering spirits for nonindustrial use and industrial 
use--(1) Nonindustrial use. A person who pays tax on a deferred basis 
under Sec.  26.112 is not required to furnish a bond under this section 
to cover shipments of distilled spirits for nonindustrial use during 
any portion of a calendar year for which the person is eligible to use 
an annual or quarterly return period under Sec.  26.112(b)(2) or 
(b)(3). For purposes of the preceding sentence, a person is considered 
to be paying tax on a deferred basis even if the person does not pay 
tax during every return period as long as the person intends to pay tax 
in a future period. TTB may require a person who has defaulted on any 
payment to prepay tax as provided in Sec.  26.112(e).
    (2) Industrial use. A person is required to furnish a bond under 
this section to cover shipments of distilled spirits for industrial use 
even if the person pays tax on a deferred basis under Sec.  26.112 and 
is eligible to use an annual or quarterly return period under Sec.  
26.112(b)(2) or (b)(3). For bond requirements governing industrial 
spirits and other products brought into the United States without 
incurring tax liability, see Sec.  26.36.

[[Page 1131]]

    (3) Nonindustrial use and industrial use defined. The nonindustrial 
and industrial uses of distilled spirits are defined in subpart D of 
part 1 of this chapter.
* * * * *

0
88. Section 26.67 is revised to read as follows:


Sec.  26.67   Bond, TTB Form 5120.32--Wine.

    (a) General. Except as provided in paragraph (b) of this section, 
where a proprietor intends to withdraw, for purpose of shipment to the 
United States, wine of Puerto Rican manufacture from bonded storage in 
Puerto Rico on computation, but before payment, of the tax imposed by 
26 U.S.C. 7652(a), equal to the tax imposed in the United States by 26 
U.S.C. 5041, the proprietor must, before making any such withdrawal, 
furnish a bond. The proprietor must furnish the bond on TTB Form 
5120.32, to secure payment of such tax, at the time and in the manner 
prescribed in this subpart, on all wine so withdrawn. The bond must be 
executed in a penal sum not less than the amount of unpaid tax which, 
at any one time, is chargeable against the bond. The penal sum of such 
bond must not exceed $250,000, but in no case will the penal sum be 
less than $500.
    (b) Bonds covering wine for nonindustrial use and industrial use--
(1) Nonindustrial use. A proprietor who pays tax on a deferred basis 
under Sec.  26.112 is not required to furnish a bond under this section 
to cover shipments of wine for nonindustrial use during any portion of 
a calendar year for which the proprietor is eligible to use an annual 
or quarterly return period under Sec.  26.112(b)(2) or (b)(3). For 
purposes of the preceding sentence, the proprietor is considered to be 
paying tax on a deferred basis even if the proprietor does not pay tax 
during every return period as long as the proprietor intends to pay tax 
in a future period. TTB may require a proprietor who has defaulted on 
any payment to prepay tax as provided in Sec.  26.112(e).
    (2) Industrial use. A proprietor is required to furnish a bond 
under this section to cover shipments of wine for industrial use even 
if the proprietor pays tax on a deferred basis under Sec.  26.112 and 
is eligible to use an annual or quarterly return period under Sec.  
26.112(b)(2) or (b)(3).
    (3) Nonindustrial use and industrial use defined. The nonindustrial 
and industrial uses of wine are defined in subpart D of part 1 of this 
chapter.

(Aug. 16, 1954, Chapter 736, 68A Stat. 775, as amended, 847, as 
amended, 906, 907, as amended (26 U.S.C. 6302, 7101, 7102, 
7651(2)(B), 7652(a)))


0
89. Section 26.68 is revised to read as follows:


Sec.  26.68   Bond, TTB Form 5130.16--Beer.

    (a) General. Except as provided in paragraph (b) of this section, 
where a brewer intends to withdraw, for purpose of shipment to the 
United States, beer of Puerto Rican manufacture from bonded storage in 
Puerto Rico on computation, but before payment, of the tax imposed by 
26 U.S.C. 7652(a), equal to the tax imposed in the United States by 26 
U.S.C. 5051, the brewer must, before making any such withdrawal, 
furnish a bond. The brewer must furnish the bond on TTB Form 5130.16, 
to secure payment of such tax, at the time and in the manner prescribed 
in this subpart, on all beer so withdrawn. The bond must be executed in 
a penal sum not less than the amount of unpaid tax which, at any one 
time, is chargeable against the bond. The penal sum of such bond must 
not exceed $500,000, but in no case will the penal sum be less than 
$1,000.
    (b) Bond exemption for certain brewers based on tax liability. A 
brewer who pays tax on a deferred basis under Sec.  26.112 is not 
required to furnish a bond under this section to cover shipments of 
beer during any portion of a calendar year for which the brewer is 
eligible to use an annual or quarterly return period under Sec.  
26.112(b)(2) or (b)(3). For purposes of the preceding sentence, the 
brewer is considered to be paying tax on a deferred basis even if the 
brewer does not pay tax during every relevant period as long as the 
brewer intends to pay tax in a future period. TTB may require a brewer 
who has defaulted on any payment to prepay tax as provided in Sec.  
26.112(e).

(Aug. 16, 1954, Chapter 736, 68A Stat. 775, as amended, 847, as 
amended, 906, 907, as amended (26 U.S.C. 6302, 7101, 7102, 
7651(2)(B), 7652(a)))

Sec.  26.68a   [Amended]

0
90. In Sec.  26.68a, the second sentence is amended as follows:
0
a. By removing the words ``TTB Form 5110.51 or 2900'' and adding, in 
their place, the words ``TTB Form 5110.51 or 5100.21''; and
0
b. By removing the words ``, TTB Form 5110.32, 2927, or 2929,''.

0
91. Section 26.70 is revised to read as follows:


Sec.  26.70   Superseding bonds and new bonds for previously exempt 
persons.

    (a) Superseding bonds. Superseding bonds will be required in case 
of insolvency or removal of any surety, and may, at the discretion of 
the appropriate TTB officer, be required in any other contingency 
affecting the validity or impairing the efficiency of an existing bond. 
Executors, administrators, assignees, receivers, trustees, or other 
persons acting in a fiduciary capacity, continuing or liquidating the 
business of the principal, must execute and file a superseding bond or 
obtain the consent of the surety or sureties on the existing bond or 
bonds. Where, under the provisions of Sec.  26.72, the surety on any 
bond given under this subpart has filed an application to be relieved 
of liability under said bond and the principal desires or intends to 
continue the operations to which such bond relates, he must file a 
valid superseding bond to be effective on or before the date specified 
in the surety's notice. Superseding bonds must show the current date of 
execution and the effective date.
    (b) New bonds for previously exempt persons. If a person has not 
furnished a bond as provided in this subpart because the person was 
exempt from bond requirements under Sec. Sec.  26.66(c), 26.67(b), or 
26.68(b), the person must furnish a bond to cover shipments following 
the first date on which the aggregate amount of tax due from the person 
during the calendar year exceeds $50,000. If a person has not furnished 
the required bond for shipments under this subpart, the person must 
prepay tax on those shipments as provided in Sec.  26.112(e).


Sec.  26.71   [Amended]

0
92. In Sec.  26.71, paragraph (c) is amended by adding after the words 
``under the bond'' the words ``(including for the reason that the 
principal is exempt from bond requirements under Sec. Sec.  26.66(c), 
26.67(b), or 26.68(b))''.

0
93. Section 26.74 is revised to read as follows:


Sec.  26.74   Release of pledged securities or cash (including cash 
equivalents).

    Securities of the United States pledged and deposited as provided 
in Sec.  26.63(a), will be released only in accordance with the 
provisions of 31 CFR part 225. Securities and cash (including cash 
equivalents) will not be released by the appropriate TTB officer until 
the liability under the bond for which they were pledged has been 
terminated. When the appropriate TTB officer is satisfied that they may 
be released, the appropriate TTB officer will fix the date or dates on 
which a part or all of such securities and cash (including cash 
equivalents) may be released. At any time prior to the release, the 
appropriate TTB officer may extend the date of release for such

[[Page 1132]]

additional length of time as the appropriate TTB officer deems 
necessary.

(61 Stat. 650; 6 U.S.C. 15)



0
94. Section 26.75 is amended as follows:
0
a. By revising the section heading; and
0
b. By removing the words ``Form 1490'' and adding, in their place, the 
words ``TTB Form 5000.23 PR''.
    The revision reads as follows:


Sec.  26.75   TTB Form 5000.23 PR, Notice of Termination of Bond.

* * * * *


Sec.  26.76   [Amended]

0
95. Section 26.76 is amended as follows:
0
a. By removing the words ``Form 2900'' and adding, in their place, the 
words ``TTB Form 5100.21''; and
0
b. By removing the words ``Form 487B'' and adding, in their place, the 
words ``TTB Form 5170.7''.

0
96. Section 26.80 is amended as follows:
0
a. By revising paragraph (a); and
0
b. By revising the Office of Management and Budget control number 
reference at the end of the section.
    The revisions read as follows:


Sec.  26.80   Deferred payment of tax--release of spirits.

    (a) Action by proprietor. Where the proprietor wishes to defer 
payment of tax, he must execute an agreement on TTB Form 5110.51 to pay 
the amount of tax which has been computed and entered on the form. If a 
bond is required under Sec.  26.66, he must certify, under the 
penalties of perjury, that he is not in default of any payment of tax 
chargeable against his bond, and that his bond is in the maximum penal 
sum, or that it is sufficient to cover the amount of tax on the 
distilled spirits described on the form in addition to all other 
amounts chargeable against this bond. If the proprietor deferring 
payment of tax is not required to provide a bond under Sec.  26.66, the 
proprietor must certify under the penalties of perjury that the 
proprietor was liable for not more than $50,000 in taxes in the 
preceding calendar year, reasonably expects to be liable for not more 
than $50,000 during the current calendar year, and is not using the TTB 
Form 5100.21 for any shipment of distilled spirits for industrial use. 
The proprietor must deliver all copies of TTB Form 5110.51 and any 
package gauge record as provided in Sec.  26.164a to the revenue agent.
* * * * *

(Approved by the Office of Management and Budget under control 
number 1513-0056)


Sec.  26.87   [Amended]

0
97. Section 26.87 is amended by removing the words ``Form 487B'' and 
adding, in their place, the words ``TTB Form 5170.7''.

0
98. Section 26.93 is amended as follows:
0
a. By revising the section heading; and
0
b. By removing the words ``Form 2900'' and adding, in their place, the 
words ``TTB Form 5100.21''.
    The revision reads as follows:


Sec.  26.93   Application and permit, TTB Form 5100.21.

* * * * *

0
99. Section 26.95 is amended as follows:
0
a. By revising paragraph (a);
0
b. In paragraph (b), by removing the words ``Form 2900'' each place 
they appear and adding, in their place, the words ``TTB Form 5100.21''; 
and
0
c. In paragraph (b), by removing the words ``Form 2897'' and adding, in 
their place, the words ``TTB Form 5120.32''.
    The revision reads as follows:


Sec.  26.95   Deferred payment of tax--release of wine.

    (a) Action by proprietor. Where the proprietor wishes to defer 
payment of tax, he must execute the agreement on TTB Form 5100.21 to 
pay the amount of tax which has been computed and entered on the form. 
If a bond is required under Sec.  26.67, he must certify under the 
penalties of perjury that he is not in default of any payment of tax 
chargeable against his bond, and that his bond is in the maximum penal 
sum, or that it is sufficient to cover the amount of tax on the wine 
described on the form in addition to all other amounts chargeable 
against his bond. If the proprietor deferring payment of tax is not 
required to provide a bond under Sec.  26.67, the proprietor must 
certify under the penalties of perjury that the proprietor was liable 
for not more than $50,000 in taxes in the preceding calendar year, 
reasonably expects to be liable for not more than $50,000 during the 
current calendar year, and is not using the TTB Form 5100.21 for any 
shipment of wine for industrial use. The proprietor must deliver all 
copies of TTB Form 5100.21 to the revenue agent.
* * * * *


Sec.  26.97   [Amended]

0
100. Section 26.97 is amended as follows:
0
a. By removing the words ``Form 487B'' and adding, in their place, the 
words ``TTB Form 5170.7''; and
0
b. By removing the word ``487B-61-3'' and adding, in its place, the 
words ``5170.7-17-1''.

0
101. Section 26.102 is amended as follows:
0
a. By revising the section heading; and
0
b. By removing the words ``Form 2900'' each place they appear and 
adding, in their place, the words ``TTB Form 5100.21''.
    The revision reads as follows:


Sec.  26.102   Application and permit, TTB Form 5100.21.

* * * * *


Sec.  26.103   [Amended]

0
102. Section 26.103 is amended by removing the words ``Form 2900'' and 
adding, in their place, the words ``TTB Form 5100.21''.

0
103. Section 26.104 is amended as follows:
0
a. By revising paragraph (a);
0
b. In paragraph (b), by removing the words ``Form 2900'' each place 
they appear and adding, in their place, the words ``TTB Form 5100.21''; 
and
0
c. In paragraph (b), by removing the words ``Form 2898'' and adding, in 
their place, the words ``TTB Form 5130.16''.
    The revision reads as follows:


Sec.  26.104   Deferred payment of tax--release of beer.

    (a) Action by brewer. Where the brewer will defer payment of tax, 
he must execute the agreement on TTB Form 5100.21 to pay the amount of 
tax which has been computed and entered on the form. If a bond is 
required under Sec.  26.68, he must certify under the penalties of 
perjury that he is not in default of any payment of tax chargeable 
against his bond, and that his bond is in the maximum penal sum, or 
that it is sufficient to cover the amount of tax on the beer described 
on the form in addition to all other amounts chargeable against his 
bond. If the brewer deferring payment of tax is not required to provide 
a bond under Sec.  26.68, the brewer must certify under the penalties 
of perjury that the brewer was liable for not more than $50,000 in 
taxes in the preceding calendar year and reasonably expects to be 
liable for not more than $50,000 during the current calendar year. The 
brewer must deliver all copies of Form 5100.21 to the revenue agent.
* * * * *


Sec.  26.106   [Amended]

0
104. Section 26.106 is amended as follows:
0
a. By removing the words ``Form 487B'' and adding, in their place, the 
words ``TTB Form 5170.7''; and

[[Page 1133]]

0
b. By removing the word ``487B-61-3'' and adding, in its place, the 
words ``5170.7-17-1''.

0
105. Section 26.108 is amended as follows:
0
a. By revising the section heading; and
0
b. By removing the words ``Form 2900'' from paragraph (b) and adding, 
in their place, the words ``TTB Form 5100.21''.
    The revision reads as follows:


Sec.  26.108   Application for permit, TTB Form 5100.51 and/or 5100.21.

* * * * *


Sec.  26.110   [Amended]

0
106. Section 26.110 is amended by removing the words ``Form 2900'' each 
place they appear and adding, in their place, the words ``TTB Form 
5100.21''.

0
107. Section 26.112 is amended as follows:
0
a. By revising paragraph (b);
0
b. In paragraph (d), by removing the words ``TTB F 5000.24'' each place 
they appear and adding, in their place, the words ``TTB Form 5000.25''; 
and
0
c. In paragraph (e), by removing the word ``bonded''.
    The revision reads as follows:


Sec.  26.112   Returns for deferred payment of tax.

* * * * *
    (b) Return periods--(1) Semimonthly return period. Except in the 
case of a taxpayer who qualifies for, and chooses to use, annual or 
quarterly return periods as provided in paragraph (b)(2) or (b)(3) of 
this section, all taxpayers must use semimonthly return periods for 
deferred payment of tax. The semimonthly return periods run from the 
1st day through the 15th day of each month, and from the 16th day 
through the last day of each month, except as otherwise provided in 
paragraph (d) of this section.
    (2) Annual return period. Subject to paragraph (b)(4) of this 
section, a taxpayer may choose to use an annual return period if the 
taxpayer was not liable for more than $1,000 in taxes imposed by 26 
U.S.C. 7652 in the preceding calendar year and if that taxpayer 
reasonably expects to be liable for not more than $1,000 in such taxes 
during the current calendar year. In such a case the last day for 
paying the tax and filing the return will be the 14th day after the 
last day of the calendar year. However, the taxpayer may not use the 
annual return period procedure for any portion of the calendar year 
following the first date on which the aggregate amount of tax due from 
the taxpayer during the calendar year exceeds $1,000, and any tax that 
has not been paid on that date will be due on the 14th day after the 
last day of the quarterly or semimonthly period in which that date 
occurs.
    (3) Quarterly return period. Except as provided in paragraph (b)(2) 
of this section and subject to paragraph (b)(4) of this section, a 
taxpayer may choose to use a quarterly return period if the taxpayer 
was not liable for more than $50,000 in taxes imposed by 26 U.S.C. 7652 
in the preceding calendar year and if that taxpayer reasonably expects 
to be liable for not more than $50,000 in such taxes during the current 
calendar year. In such a case the last day for paying the tax and 
filing the return will be the 14th day after the last day of the 
calendar quarter. However, the taxpayer may not use the quarterly 
return period procedure for any portion of the calendar year following 
the first date on which the aggregate amount of tax due from the 
taxpayer during the calendar year exceeds $50,000, and any tax that has 
not been paid on that date will be due on the 14th day after the last 
day of the semimonthly period in which that date occurs.
    (4) The following additional rules apply to the annual and 
quarterly return period procedures under this section:
    (i) A ``taxpayer'' is an individual, corporation, partnership, or 
other entity that is assigned a single Employer Identification Number 
as defined in 26 CFR 301.7701-12;
    (ii) ``Reasonably expects'' means that there is no existing or 
anticipated circumstance known to the taxpayer (such as an increase in 
production capacity) that would cause the taxpayer's tax liability to 
exceed the prescribed limit;
    (iii) A taxpayer with multiple locations must combine the tax 
liability for all locations with respect to distilled spirits, wine, or 
beer tax liability to determine eligibility for the return procedures;
    (iv) A taxpayer who has both domestic operations and import 
transactions must combine the tax liability on the domestic operations 
and the imports with respect to distilled spirits, wine, or beer tax 
liability to determine eligibility for the return procedures;
    (v) The controlled group rules of 26 U.S.C. 5061(e), which concern 
treatment of controlled groups as one taxpayer, do not apply for 
purposes of determining eligibility for the return procedures. However, 
a taxpayer who is eligible for the return procedures, and who is a 
member of a controlled group that owes $5 million or more in distilled 
spirits, wine, or beer excise taxes per year, is required to pay taxes 
by electronic fund transfer (EFT). Quarterly payments via EFT must be 
transmitted in accordance with section 5061(e);
    (vi) A new taxpayer is eligible to use the return procedures in the 
first year of business simply if the taxpayer reasonably expects to be 
liable for not more than $1,000 (in the case of the annual return 
procedure) or $50,000 (in the case of the quarterly return procedure) 
in distilled spirits, wine, or beer taxes during that calendar year; 
and
    (vii) If a taxpayer becomes ineligible to use a return procedure 
described in paragraph (b)(2) or (3) of this section because the 
taxpayer's liability exceeds $1,000 or $50,000, respectively, during a 
taxable year, that taxpayer may resume that return procedure only after 
a full calendar year has passed during which the taxpayer's liability 
did not exceed $1,000 or $50,000 as the case may be. A taxpayer may not 
use an annual or quarterly return procedure during any calendar year in 
which the taxpayer reasonably expects to be liable for more than $1,000 
(in the case of the annual return procedure) or $50,000 (in the case of 
the quarterly return procedure) in distilled spirits, wine, or beer 
taxes.
* * * * *

0
108. In Sec.  26.113, paragraph (a) is amended by adding a new first 
sentence immediately after the paragraph heading to read as follows:


Sec.  26.113   Returns for prepayment of taxes.

    (a) * * * Except as provided in Sec. Sec.  26.66(c), 26.67(b), or 
26.68(b), a proprietor must have an approved bond to defer payment of 
taxes. * * *.
* * * * *

0
109. Section 26.115 is amended as follows:
0
a. By revising the section heading; and
0
b. By removing the words ``Form 487B'' each place they appear and 
adding, in their place, the words ``TTB Form 5170.7''.
    The revision reads as follows:


Sec.  26.115   Application, TTB Form 5170.7.

* * * * *

0
110. Section 26.116 is amended as follows:
0
a. By revising the section heading;
0
b. In the first sentence, by removing the words ``, pursuant to a 
sufficient bond,''; and
0
c. By removing the words ``Form 487B'' each place they appear and 
adding, in their place, the words ``TTB Form 5170.7''.
    The revision reads as follows:


Sec.  26.116   Issuance of permit, TTB Form 5170.7, and customs 
inspection.

* * * * *

[[Page 1134]]

Sec.  26.117   [Amended]

0
111. Section 26.117 is amended by removing the words ``Form 487B'' and 
adding, in their place, the words ``TTB Form 5170.7''.


Sec.  26.118   [Amended]

0
112. Section 26.118 is amended by removing the words ``Form 487B'' each 
place they appear and adding, in their place, the words ``TTB Form 
5170.7''.


Sec.  26.119   [Amended]

0
113. Section 26.119 is amended by removing the words ``Form 487B'' and 
adding, in their place, the words ``TTB Form 5170.7''.


Sec.  26.165   [Amended]

0
114. In Sec.  26.165, paragraph (a) introductory text is amended by 
removing the words ``TTB bond'' and adding, in their place, the words 
``the bonded premises of a distilled spirits plant''.

0
115. The heading for subpart Ib is revised to read as follows:

Subpart Ib--Shipment of Bulk Distilled Spirits From Puerto Rico, 
Without Payment of Tax, for Transfer From Customs Custody to the 
Bonded Premises of a Distilled Spirits Plant


Sec.  26.199   [Amended]

0
116. Section 26.199 is amended by removing the words ``internal revenue 
bond'' and adding, in their place, the words ``the bonded premises of a 
distilled spirits plant''.


Sec.  26.199d   [Amended]

0
117. In Sec.  26.199d, paragraph (b) is amended by removing the words 
``internal revenue bond'' and adding, in their place, the words ``the 
bonded premises of a distilled spirits plant''.

0
118. The heading for subpart Oa is revised to read as follows:

Subpart Oa--Shipment of Bulk Distilled Spirits From the Virgin 
Islands, Without Payment of Tax, for Transfer From Customs Custody 
to the Bonded Premises of a Distilled Spirits Plant

PART 27--IMPORTATION OF DISTILLED SPIRITS, WINES, AND BEER

0
119. The authority citation for part 27 is revised to read as follows:

    Authority:  5 U.S.C. 552(a), 19 U.S.C. 81c, 1202; 26 U.S.C. 
5001, 5007, 5008, 5010, 5041, 5051, 5054, 5061, 5121, 5122-5124, 
5201, 5205, 5207, 5232, 5273, 5301, 5313, 5555, 6109, 6302, 7805.


0
120. Section 27.11 is amended as follows:
0
a. In the definition of ``Bonded premises--distilled spirits plant'', 
by adding a second sentence; and
0
b. In the definition of ``Eligible wine'', by adding a second sentence.
    The additions read as follows:


Sec.  27.11   Meaning of terms.

* * * * *
    Bonded premises--distilled spirits plant. * * * This term includes 
premises described in the preceding sentence even if the distilled 
spirits plant proprietor, as authorized under the exemption set forth 
in Sec.  19.151(d) of this chapter, has not provided a bond for the 
premises.
* * * * *
    Eligible wine. * * * For purposes of this definition, the phrase 
``receipt in bond'' applies to wine on which tax has not been 
determined or paid that is received by the proprietor of a distilled 
spirits plant, even if the proprietor, as authorized under the 
exemption set forth in Sec.  19.151(d) of this chapter, is not required 
to provide a bond for the premises where the wine is received.
* * * * *


Sec.  27.40   [Amended]

0
121. In Sec.  27.40, paragraph (a) is amended by removing the words 
``entered into bond'' and adding, in their place, the words 
``transferred to the bonded premises of a distilled spirits plant''.


Sec.  27.43   [Amended]

0
122. Section 27.43 is amended by removing the words ``entered into 
bond'' and adding, in their place, the words ``transferred to the 
bonded premises of a distilled spirits plant''.


Sec.  27.171   [Amended]

0
123. Section 27.171 is amended by removing the words ``internal revenue 
bond'' and adding, in their place, the words ``the bonded premises of a 
distilled spirits plant''.

0
124. Section 27.175 is amended by adding a new second sentence 
immediately after the first sentence to read as follows:


Sec.  27.175   Receipt by consignee.

    * * * Proprietors of distilled spirits plants may receive such 
imported spirits even if they are exempt from bond requirements under 
Sec.  19.151(d) of this chapter. * * *

PART 28--EXPORTATION OF ALCOHOL

0
125. The authority citation for part 28 is revised to read as follows:

    Authority:  5 U.S.C. 552(a); 19 U.S.C. 81c, 1202; 26 U.S.C. 
5001, 5007, 5008, 5041, 5051, 5054, 5061, 5121, 5122, 5201, 5205, 
5207, 5232, 5273, 5301, 5313, 5555, 6109, 6302, 7805; 27 U.S.C. 203, 
205; 44 U.S.C. 3504(h).


Sec. Sec.  28.61, 28.62, 28.63, 28.64, 28.70, 28.72, 28.160, and 
28.214   [Amended]

0
126. For each section indicated in the left-hand column of the table 
below, the section is amended by removing the text indicated in the 
middle column, and adding, in its place, the text indicated in the 
right-hand column:

------------------------------------------------------------------------
             Section                    Remove                Add
------------------------------------------------------------------------
28.61, section heading..........  Bond, Form 2734     Bond, Form
                                   (5100.25).          5100.25.
28.61, text.....................  2734 (5100.25)....  5100.25.
28.62, section heading..........  Bond, Form 2735     Bond, Form
                                   (5100.30).          5100.30.
28.62(a)........................  2735 (5100.30)....  5100.30.
28.62(c)........................  2735 (5100.30)....  5100.30.
28.62(c)........................  1533 (5000.18)....  5000.18.
28.62(d)........................  2735 (5100.30)....  5100.30.
28.62(d)........................  1533 (5000.18)....  5000.18.
28.63, section heading..........  Bond, Form 2736     Bond, Form
                                   (5100.12).          5100.12.
28.63, text.....................  2736 (5100.12)....  5100.12.
28.64, section heading..........  Bond, Form 2737...  Bond, Form
                                                       5110.67.
28.64(a), first sentence........  2737 (5110.67)....  5110.67.
28.64(a), twice in the fourth     2737 (5110.67)....  5110.67.
 sentence.
28.64(b)........................  2737 (5110.67)....  5110.67.
28.64(b)........................  1533..............  5000.18.

[[Page 1135]]

 
28.70, section heading..........  Termination of      Termination of
                                   Bonds, Forms 2734   Bonds, Forms
                                   (5120.25) and       5120.25 and
                                   2736 (5100.12).     5100.12.
28.70, text.....................  2734 (5120.25) and  5120.25 and
                                   27.36 (5100.12).    5100.12.
28.72...........................  2735 (5100.30),     5100.30 or
                                   2737 (5110.67),     5110.67.
                                   or 2738 (5110.68).
28.160(b).......................  1533..............  5000.18.
28.214, section heading.........  Notice and claim,   Notice and claim,
                                   Form 1582-A         Form 5120.24.
                                   (5120.24).
28.214, first sentence..........  1582-A (5120.24)..  5120.24.
28.214, second sentence.........  1582-A (5120.24)..  5120.24.
------------------------------------------------------------------------

Sec.  28.3   [Amended]

0
127. In Sec.  28.3, the list of related regulations is amended by 
removing the entry ``31 CFR Part 225--Acceptance of Bonds, Notes, or 
Other Obligations Issued or Guaranteed by the United States as Security 
in Lieu of Surety or Sureties on Penal Bonds'' and adding, in its 
place, the entry ``31 CFR part 225--Acceptance of Bonds Secured by 
Government Obligations in Lieu of Bonds with Sureties''.

0
128. Section 28.11 is amended as follows:
0
a. In the definition of ``Bonded premises--distilled spirits plant'', 
by adding a second sentence; and
0
b. In the definition of ``Bonded wine cellar'', by adding a second 
sentence.
    The additions read as follows:


Sec.  28.11   Meaning of terms.

* * * * *
    Bonded premises--distilled spirits plant. * * * This term includes 
premises described in the preceding sentence even if the distilled 
spirits plant proprietor, as authorized under the exemption set forth 
in Sec.  19.151(d) of this chapter, has not provided a bond for the 
premises.
    Bonded wine cellar. * * * This term includes premises described in 
the preceding sentences even if the proprietor, as authorized under the 
exemption set forth in Sec.  24.146(d), has not provided a bond for the 
premises.
* * * * *


Sec.  28.22   [Amended]

0
129. Section 28.22 is amended by adding after the words ``principal on 
the bond'' the words ``or, if no bond is required, against the person 
liable for the tax''.

0
130. Section 28.51 is amended as follows:
0
a. By redesignating the existing text as paragraph (a) and adding a 
paragraph heading; and
0
b. By adding paragraphs (b) and (c).
    The additions read as follows:


Sec.  28.51   General.

    (a) Bond requirements. * * *
    (b) Exemption from bond requirements. If a taxpayer described in 
this paragraph exports distilled spirits, wine, or beer for which a 
bond is otherwise required under this part, the taxpayer is not 
required to file a bond for the exportation if all the following are 
true:
    (1) In the case of exportation of distilled spirits or wine, the 
distilled spirits or wine is for nonindustrial use; and
    (2) The taxpayer:
    (i) Reasonably expects to be liable for not more than $50,000 in 
taxes described in 26 U.S.C. 5061(d)(4) during the current calendar 
year;
    (ii) Was liable for not more than $50,000 in such taxes in the 
preceding calendar year; and
    (iii) Pays such taxes on a deferred basis using a semimonthly, 
quarterly, or annual return period as described in 26 U.S.C. 5061(d).
    (c) Definitions. For purposes of paragraph (b) of this section, the 
following terms have the meanings indicated:
    Nonindustrial use. The nonindustrial uses of distilled spirits and 
wine are defined in subpart D of part 1 of this chapter.
    Reasonably expects. When used with reference to a taxpayer, 
reasonably expects means that there is no existing or anticipated 
circumstances known to the taxpayer (such as an increase in production 
capacity) that would cause the taxpayer's tax liability to exceed the 
prescribed limit.
    Taxpayer. A taxpayer is an individual, corporation, partnership, or 
other entity that is assigned a single Employer Identification Number 
(EIN) as defined in 26 CFR 301.7701-12.

0
131. Section 28.52 is amended as follows:
0
a. In paragraph (a), by removing the words ``Circular No. 570'' and 
adding, in their place, the words ``Circular 570''; and
0
b. By revising paragraph (b).
    The revision reads as follows:


Sec.  28.52   Corporate surety.

* * * * *
    (b) Department of the Treasury Circular 570 is published in the 
Federal Register annually on the first business day in July, and 
supplemental changes are published periodically thereafter. The most 
recent circular and any supplemental changes to it may be viewed on the 
Bureau of the Fiscal Service Web site at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm.
* * * * *

0
132. Section 28.53 is amended as follows:
0
a. By revising the section heading;
0
b. By redesignating the existing text as paragraph (a) and adding a 
paragraph heading; and
0
c. By adding paragraph (b).
    The revision and additions read as follows:


Sec.  28.53   Deposit of securities or cash (including cash equivalent) 
in lieu of corporate surety.

    (a) Deposit of securities. * * *
    (b) Deposit of cash (including cash equivalent). In lieu of 
corporate surety, a person may file a bond that guarantees payment of 
the liability by submitting cash or its equivalent (including a money 
order, cashier's check, or personal check). Cash or its equivalent must 
be no less than the penal sums of the required bonds. Cash equivalents 
must be payable to the Alcohol and Tobacco Tax and Trade Bureau.
* * * * *


Sec.  28.54   [Amended]

0
133. Section 28.54 is amended by removing the words ``Form 1533'' and 
adding, in their place, the words ``TTB Form 5000.18''.

0
134. In Sec.  28.58, paragraphs (a) and (b) are revised to read as 
follows:


Sec.  28.58   Operations or unit bond--distilled spirits.

    (a) Spirits. Where, as authorized in Sec.  28.91, spirits are 
withdrawn without payment of tax, from the bonded premises of a 
distilled spirits plant on notice of the proprietor thereof, the 
approved operations or unit bond must cover such withdrawals if the 
proprietor is required to give a bond under part 19 of this chapter.

[[Page 1136]]

    (b) Wine. Where the provisions of part 19 of this chapter require 
an operations or unit bond to be given and approved to cover the 
operations of a distilled spirits plant and an adjacent bonded wine 
cellar, such bond will cover the withdrawal of wine without payment of 
tax, as authorized in Sec.  28.121, from such bonded wine cellar on 
application for such withdrawal by the proprietor.
* * * * *

0
135. Section 28.60 is revised to read as follows:


Sec.  28.60   Brewer's bond, Form 5130.22.

    When beer or beer concentrate is removed from a brewery without 
payment of tax for any of the purposes authorized in Sec.  28.141, the 
brewer's bond, Form 5130.22, will cover the removals if a bond is 
required to be furnished under the provisions of part 25 of this 
chapter.

(49 Stat. 999, as amended (19 U.S.C. 81c); sec. 201, Pub. L. 85-859, 
72 Stat. 1334, as amended, 1388, as amended (26 U.S.C. 5053, 5401))

Sec.  28.65   [Removed and Reserved]

0
136. Section 28.65 is removed and reserved.

0
137. Section 28.67 is revised to read as follows:


Sec.  28.67   Superseding bonds and new bonds for previously exempt 
persons.

    (a) Superseding bonds. Superseding bonds will be required in case 
of insolvency or removal of any surety, and may, at the discretion of 
the appropriate TTB officer, be required in any other contingency 
affecting the validity or impairing the efficiency of such bond. 
Executors, administrators, assignees, receivers, trustees, or other 
persons acting in a fiduciary capacity, continuing or liquidating the 
business of the principal, must execute and file a superseding bond or 
obtain the consent of the surety or sureties on the existing bond or 
bonds. Where, under the provisions of Sec.  28.72, the surety on any 
bond given under this subpart has filed an application to be relieved 
of liability under said bond and the principal desires or intends to 
continue the business or operations to which such bond relates, he must 
file a valid superseding bond to be effective on or before the date 
specified in the surety's notice. If the principal does not file a 
superseding bond when required, he must discontinue the operations 
intended to be covered by such bond forthwith. Superseding bonds must 
show the date of execution and the effective date.
    (b) New bonds for previously exempt persons. If a person has not 
furnished a bond as provided in this subpart because the person was 
exempt from bond requirements under Sec.  28.51(b), the person must 
furnish the required bond for any exportation that occurs during any 
period to which any of the exemption criteria in Sec.  28.51(b) do not 
apply to the person.

(72 Stat. 1336, 1362; 26 U.S.C. 5062, 5214)


0
138. Section 28.71 is revised to read as follows:


Sec.  28.71   Termination of bonds, Forms 5100.30 and 5110.67.

    (a) General. Continuing bonds, Forms 5100.30 and 5110.67, covering 
distilled spirits and/or wines withdrawn from time to time without 
payment of tax under this part, may be terminated as to liability for 
future withdrawals under the following circumstances:
    (1) Pursuant to application of surety as provided in Sec.  28.72;
    (2) On approval of a superseding bond as provided in Sec.  28.67; 
or
    (3) On written notification to the appropriate TTB officer by the 
principal of the discontinuance of withdrawals under the bond 
(including discontinuance of withdrawals under the bond because the 
proprietor has become exempt from bond requirements under Sec.  
28.51(b)).
    (b) Cancellation. When no further withdrawals are to be made under 
a bond on Form 5100.30 or 5110.67 under the circumstances specified in 
paragraph (a), the bond will be canceled by the appropriate TTB officer 
in the manner and subject to the conditions provided in Sec.  28.70.

(Sec. 201, Pub. L. 85-859, 72 Stat. 1336, as amended, 1352, as 
amended, 1353, as amended (26 U.S.C. 5062, 5175, 5176))



0
139. Section 28.73 is revised to read as follows:


Sec.  28.73   Relief of surety from bond.

    (a) Bonds, Forms 5120.25 and 5100.12. The surety on a bond given on 
Form 5120.25 or Form 5100.12 will be relieved from his liability under 
the bond when the bond has been canceled as provided for in Sec.  
28.70.
    (b) Bonds, Forms 5100.30 and 5110.67. Where the surety on a bond 
given on Form 5100.30 or Form 5110.67 has filed application for relief 
from liability, as provided in Sec.  28.72, the surety will be relieved 
from liability for withdrawals made wholly subsequent to the date 
specified in the notice, or on the effective date of a superseding 
bond, if one is given. Notwithstanding such relief, the liability of 
the surety will continue until the spirits and/or wines withdrawn 
without payment of tax under the bond have been properly accounted for.

(Sec. 201, Pub. L. 85-859, 72 Stat. 1336, as amended, 1352, as 
amended, 1353, as amended (26 U.S.C. 5062, 5175, 5176))



0
140. Section 28.74 is revised to read as follows:


Sec.  28.74   Release of pledged securities or cash (including cash 
equivalents).

    Securities of the United States, pledged and deposited as provided 
in Sec.  28.53, will be released only in accordance with the provisions 
of 31 CFR part 225. Securities and cash (including cash equivalents) 
will not be released by the appropriate TTB officer until liability 
under the bond for which they were pledged has been terminated. When 
the appropriate TTB officer is satisfied that they may be released, he 
will fix the date or dates on which a part or all of such securities 
and cash (including cash equivalents) may be released. At any time 
prior to the release, the appropriate TTB officer may extend the date 
of release for such additional length of time as he deems necessary.

(61 Stat. 650; 6 U.S.C. 15)

Sec.  28.80   [Amended]

0
141. Section 28.80 is amended by removing the last sentence.


Sec.  28.91   [Amended]

0
142. In Sec.  28.91, paragraph (b) is amended by removing the words 
``All withdrawals'' and adding, in their place, the words ``Except as 
provided in Sec.  28.51(b), all withdrawals''.


Sec.  28.95   [Amended]

0
143. Section 28.95 is amended by removing the words ``in internal 
revenue bond'' and adding, in their place, the words ``on the bonded 
premises of a distilled spirits plant''.


Sec.  28.96   [Amended]

0
144. Section 28.96 is amended by removing the words ``required bond'' 
and adding, in their place, the words ``bond (if required)''.


Sec.  28.116   [Amended]

0
145. In Sec.  28.116, paragraph (d) is amended by removing the words 
``principal on the bond under which the spirits were withdrawn'' and 
adding, in their place, the words ``person who withdrew the spirits''.


Sec.  28.117   [Amended]

0
146. Section 28.117 is amended as follows:
0
a. In the first sentence, by removing the words ``principal on the bond 
under which the spirits were withdrawn'' and adding, in their place, 
the words ``person who withdrew the spirits''; and

[[Page 1137]]

0
b. By removing the word ``principal'' in every other place it appears 
and adding, in its place, the word ``person''.


Sec.  28.121   [Amended]

0
147. Section 28.121 is amended in the undesignated concluding paragraph 
by removing the words ``All such withdrawals'' and adding, in their 
place, the words ``Except as provided in Sec.  28.51(b), all such 
withdrawals''.


Sec.  28.131   [Amended]

0
148. In Sec.  28.131, paragraph (b) is amended by removing the words 
``principal on the bond under which the wines were withdrawn'' and 
adding, in their place, the words ``person who withdrew the wines''.


Sec.  28.132   [Amended]

0
149. Section 28.132 is amended as follows:
0
a. In the first sentence, by removing the words ``principal on the bond 
under which the wines were withdrawn'' and adding, in their place, the 
words ``person who withdrew the wines'';
0
b. In the second sentence, by removing the words ``principal on the 
bond'' and adding, in their place, the word ``person''; and
0
c. By removing the word ``principal'' in every other place it appears 
and adding, in its place, the word ``person''.


Sec.  28.141   [Amended]

0
150. In Sec.  28.141, paragraph (c) is amended by removing the words 
``All removals'' and adding, in their place, the words ``Except where 
the brewer is not required to hold a bond under Sec.  25.91(e) of this 
chapter, all removals''.


Sec.  28.215   [Amended]

0
151. Section 28.215 is amended as follows:
0
a. In the first sentence, by removing the words ``from bond'' and 
adding, in their place, the words ``from bonded premises'';
0
b. By removing the words ``Form 1582-A (5120.24)'' and adding, in their 
place, the words ``Form 5120.24''; and
0
c. By removing the words ``Form 2605 (5120.20)'' each place they appear 
and adding, in their place, the words ``Form 5120.20''.


Sec.  28.250   [Amended]

0
152. Section 28.250 is amended as follows:
0
a. In the introductory text, by removing the words ``, and the 
principal has filed bond, Form 2738 (5110.68)''; and
0
b. In paragraph (a)(4), by removing the words ``1582-A (5120.24)'' and 
adding, in their place, the word ``5120.24''.


Sec.  28.303   [Amended]

0
153. Section 28.303 is amended as follows:
0
a. In the introductory text, by removing the words ``Form 2635 
(5620.8)'' and adding, in their place, the word ``5620.8''; and
0
b. In paragraph (e), by adding after the word ``bond'' the words ``(as 
applicable)''.


Sec.  28.317   [Amended]

0
154. Section 28.317 is amended as follows:
0
a. In the introductory text, by removing the words ``Form 2635 
(5620.8)'' and adding, in their place, the words ``Form 5620.8''; and
0
b. In paragraph (c), by adding after the word ``bond'' the words ``(as 
applicable)''.


Sec.  28.331   [Removed and Reserved]

0
155. Section 28.331 is removed and reserved.


Sec.  28.332   [Removed and Reserved]

0
156. Section 28.332 is removed and reserved.

0
157. Section 28.333 is amended as follows:
0
a. By revising the section heading;
0
b. By removing the words ``1582-A (5120.24)'' in every place it appears 
and adding, in its place, the word ``5120.24'';
0
c. By removing the words ``, is not supported by a bond on Form 2738 
(5110.68)'' and adding, in their place, the words ``is made''; and
0
d. By removing the words ``Form 1582-B (5130.6)'' and adding, in their 
place, the words ``Form 5130.6''.
    The revision reads as follows:


Sec.  28.333   Claims for drawback.

* * * * *

PART 30--GAUGING MANUAL

0
158. The authority citation for part 30 continues to read as follows:

    Authority:  26 U.S.C. 7805.

0
159. Section 30.11 is amended by adding a definition of ``Bonded 
premises'' in alphabetical order to read as follows:


Sec.  30.11   Meaning of terms.

* * * * *
    Bonded premises. The bonded premises of a distilled spirits plant 
as described in part 19 of this chapter. This term includes premises 
described in the preceding sentence even if the distilled spirits plant 
proprietor has not provided a bond for the premises as authorized under 
the exemption set forth in Sec.  19.151(d) of this chapter.
* * * * *


Sec.  30.36   [Amended]

0
162. Section 30.36 is amended by removing the words ``from bond'' and 
adding, in their place, the words ``from bonded premises''.

    Signed: December 7, 2016.
John J. Manfreda,
Administrator.
    Approved: December 21, 2016.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade and Tariff Policy).
[FR Doc. 2016-31417 Filed 1-3-17; 8:45 am]
 BILLING CODE 4810-31-P